Australians have $414 billion invested in underperforming funds

Fees for no performance: High fees are killing investment returns for thousands of Australians.
By · 25 Sep 2018
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25 Sep 2018 · 5 min read
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Written by Alison Banney, this article discusses details from InvestSMARTs media release "$414bn of Australia’s hard earned cash is invested in underperforming funds". The following article appeared in Finder on September 24, 2018.

New research released today by digital wealth provider InvestSMART reveals Australians have more than $414 billion invested in underperforming managed funds. The figures, modelled from Morningstar data, highlights fees as a major issue, with thousands of managed funds charging hefty fees for no performance.

The research looked at more than 9300 managed funds. Worryingly, of the 5,297 managed funds with a 10-year track record available, 78% have underperformed their benchmark indices by 1.88% with average fees sitting at 1.74%. These fees are eating into the potential investment returns of thousands of everyday Australians.

InvestSMART has launched a new online tool, Compare Your Fund, which enables consumers to compare a large range of managed funds including super funds and pension funds. Investors can use the tool to compare the performance of funds against similar funds in the market as well as compare the fees.

InvestSMART Chairman Paul Clitheroe said, “While you can’t control the performance of your fund, you can control fees and we believe this tool will help investors truly understand the fees and costs involved in investing. There are plenty of low-cost investment products out there, if you’re paying too high a fee, you’re giving away too much of your share of investment returns.”

InvestSMART CEO Ron Hodge said technology was levelling the playing field for investors. "Fund manager fees have fallen globally over the past decade and we believe advances in technology, along with regulatory change, will continue to put pressure on traditional fee models.

Hodge emphasised that InvestSMART wasn't just another robo advice platform. "Robo advice is not advice, it's more like robo communication. InvestSMART is a digital wealth platform. I think digital wealth advisers are here to stay, and we'll only just get better."

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