Retail funds lag industry

"The numbers say the not-for-profit funds have got it right over the past decade," said Jeff Bresnahan, the founder of SuperRatings. Data from SuperRatings shows not-for-profit industry funds achieved an average annual return to March 31 this year of 5.86 per cent over the past 10 years, compared with a return of 3.56 per cent by retail funds over the same period, a difference of 2.3 percentage points.

The figures are based on a "balanced" investment option, where most people have their superannuation.

Mr Bresnahan said the main reason for the difference in returns was asset allocation. Industry super funds are more aggressive in their asset allocation with bigger exposures to "alternative" assets, which include unlisted investments such as infrastructure, private equity and hedge funds.

The data shows industry funds have a 17 per cent exposure to alternative investments whereas retail funds have just 5 per cent. Retail funds have an exposure of 8 per cent to property, mostly to listed property trusts. Industry funds have an 11 per cent exposure, mostly through direct property investments.

The data shows the only time frame going out to 10 years over which retail funds outperformed is three years. That reflects the partial recovery in listed markets since the worst of the GFC.

Returns are reported by SuperRatings net of fees. After asset allocation, the second factor for the better performance of industry funds is their lower administration fees, Mr Bresnahan said.

Low-cost retail funds are making their way onto the market but their market share is still fairly small. "We see the gap [in administration fees] closing but it's still significant at about 40 to 50 basis points," he said.