Letters of the Week

Time is money

It looks to me as though Bruce Brammall's September 12 article has completely ignored the time value of money.  Over long periods (15 or 20 years) this becomes extremely important. Because holding a property outside of super generates (negative gearing) tax savings earlier these are actually worth much more than an equivalent dollar value of CGT tax savings on sale from a property held inside super. By not taking this into account (and just cumulating the dollar amounts) the article has seriously skewed the comparisons in favour of the within-super option.

S Talbot

What are fund managers doing?

I have almost $50,000 in super; too little to take out and put in an SMSF. However, my employer put in my contributions – about $9,000 this past financial year – and by the time the fund manager had deducted their management fees, and lost lots of the money deposited, I had an annual increase in the total amount held by just $2,000.

So the fund manager charged management fees for the year, and lost $7,000 of my money, not to mention the loss of potential returns that should have been achieved, this past year and compounding in the future (and all previous years).

I fully appreciate that funds go up and down, and returns are not guaranteed – but I have yet to see a positive return from any of the fund managers my money has been with for the last 10 years. Usually they simply manage not to lose as much as they did the year before, and I always have to pay management fees.

Many years ago I worked for a gentleman who managed a futures fund. He only got paid when he generated a positive return for the month, and would get to keep 30% of the profits generated.

Are there any retail fund managers I can shift my superannuation funds to that operate on that model? No return - no fee! Big return - big fee!

I'm more than happy to share the profits but I'm sick and tired of paying ridiculous amounts in fees to faceless fund managers who consistently lose my money. At the current rate of return I will never ever have enough to be allowed to move it into an SMSF where even sticking it all into rolling term deposits would generate better returns than these so called expert fund managers are achieving.

Even my small amount of saved money in my ASX tracking fund managed a positive return – what on earth are these fund managers doing?

SW

Editor’s response: Frustration with super performance is a common refrain we hear at Eureka Report. As a first port of call consider discussing the situation with your super fund, and see if moving to a more defensive product or asset mix could help. Then there are a new breed of low- or no-fee simple super products coming onto the market as part of the federal government’s “Stronger Super” push. SMSFs may be more suited to those with larger balances, but a standard fund runs for an average of just over $4,000 a year, and this amount is getting lower, so depending on your situation it still may be cheaper to consider one. Finally, keep reading Eureka and remember there are options for you to take control.

Blemished PERLS

I always look forward to reading Eureka Report but this week it's exceptional, in that you drum some reality in the investing process. Sustainable yield is undoubtedly now king.

Phil Bayley’s précis on CBA Perls VI is timely but retail investors must be disappointed with the offer. As pointed out, the expectation was to raise $750 million but CBA announced that it had already allocated $1.5 billion in PERLS VI . It is possible that the issue may reach close to $2 billion. Yet, the CommSec broker firm offer has been capped at $20,000 for its retail clients. Meaning that joint account holders will only receive a measly allotment of 100 shares each

There's a consolation in the final paragraph pertaining to the opportunity to purchase them at a greater yield. Unfortunately it might be a long wait.

V Massonic

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