Sombre times for super. But where does default lie?

For investors, it will be more important than ever before to look behind the numbers. In good times, it's easy to roll with the profits and not worry about how your fund is investing your money.

But there's nothing like a downturn to focus the mind on where your savings are invested and how much risk your fund is taking with them.

The vast majority - about 90 per cent - of super fund members are in the default option of their fund. It's the easiest option. Instead of worrying about how much money you should have in shares versus cash and other investments, you allow your fund's trustees to make that decision for you.

Which is not entirely a bad thing. Most trustees put a lot of thought into choosing an appropriate default fund for their membership. They look for an investment strategy that is likely to produce good long-term returns (as super is a long-term investment for most people) with an acceptable level of risk. For most funds, this means a balanced or growth-oriented default option - with 60 to 80 per cent invested in "growth assets" such as shares and property.

But not all default funds fit into this group. Some default funds are much more conservative and fit more into the capital-stable style of investing with growth assets accounting for 30 per cent or less of the portfolio. Others are more aggressive with 80 or 90 per cent in growth. Some funds have life-cycle default options where your exposure to growth assets is reduced as you get older.

Presumably, the trustees had good reason for selecting these default options, but no default option will suit everyone. We're not all the same and some fund members will be horrified to find just how exposed their savings have been to the sharemarket - particularly those nearing retirement. Others may be prepared to invest more aggressively to achieve higher longer-term returns but are unknowingly stuck in a conservative default fund.

Over the past year, the more defensive default funds will have done better for the simple reason that they are less exposed to the sharemarket. But that doesn't make them better funds. Investors need to look behind the numbers to what style of investment best suits their longer-term needs.

To complicate things further, the industry can take great liberties in labelling investment options. The managing director of SuperRatings, Jeff Bresnahan, says he researched fund labelling a couple of years ago and found the names used for funds were meaningless. So-called balanced funds had anywhere between 40 and 80 per cent of their money in growth assets.

"You can forget the label," he says. "You need to ask what proportion of the fund is in growth."

As a guide, SuperRatings defines balanced funds as those with 60 to 76 per cent growth assets, and growth funds as those with 77 to 90 per cent.

Bresnahan says yet another complication is how funds define growth assets. There is raging debate in the super industry over the growing trend for funds to classify assets that were traditionally regarded as growth investments as defensive.

Bresnahan uses the example of a Canberra office building with a 20-year lease to the Federal Government. Property is traditionally regarded as a growth investment because of its potential to increase in value. However Bresnahan says the fund might argue that the rent from this property is more like a government-guaranteed income investment. It could treat part of the building's value as a defensive, fixed-interest style investment, and the land and building itself as a growth asset.

A similar argument might be applied to income from infrastructure and similar investments. It's a reasonable argument. But the problem for fund members is that it makes it even more difficult to understand how their money is invested. A fund that claims to have 70 per cent in growth assets, for example, might have closer to 80 per cent if these "defensive" investments were included.

So investors need to understand what their fund regards as growth and defensive investments, as well as the proportion allocated to each.

Unlisted investments are another factor to be aware of. When the official figures come out next week, the better-performing balanced funds will be those that have a higher exposure to unlisted investments such as direct property, direct infrastructure holdings, private equity and hedge funds.

While listed investments have been hammered over the past six months, the value of unlisted investments has generally fared better. For example, direct property investments are expected to show a positive return for the year while listed property trusts fell 37 per cent.

Bresnahan says top performing funds, such as the MTAA and Westscheme funds, have up to 50 per cent of their portfolio in unlisted assets. Industry funds generally are more inclined to use direct property and would have about 20 per cent in unlisted assets on average, while commercial funds, which have historically favoured listed investments, would have only about 5 per cent in unlisted assets.