Super call for own-up on big fees

UNION-BACKED superannuation funds are calling for sweeping new rules requiring fund managers to reveal their pay packets, with research showing the sector receives $6.2 billion a year for managing the nation's retirement savings.

By InvestSMART · 24 Oct 2012

By InvestSMART ·
24 Oct 2012

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Top fund managers whom super funds contract to manage assets can make anywhere between $500,000 and several million dollars a year.

But what individual managers are paid is often kept secret, sparking calls for reform within the industry.

In new research commissioned by Industry Super Network, Rainmaker found almost a third of the $20 billion that super members paid in fees each year about $6.2 billion went to fund managers.

ISN chief executive David Whiteley said this high share of fees underlined the need for extending laws that would require super funds to reveal more details about their board members to the funds management industry.

"It is appropriate that members know the names and backgrounds of directors and executives of their fund and their remuneration arrangements," Mr Whiteley said.

"It is equally appropriate that members are able to find the names, backgrounds and remuneration of board directors and senior executives of fund managers, platform operators and other service providers whether related parties or external providers."

Under forthcoming laws, the government will push for some fund managers to pay back bonuses in the case of underperformance, but it has not committed to requiring that all fees be disclosed.

The Financial Services Council, which represents retail funds, has resisted the call for tougher rules, saying the disclosure of total investment fees was more relevant to members.

According to Rainmaker, many of the biggest investment managers in Australia are owned by the big banks and financial houses.

Aside from the taxpayer-owned Future Fund, the biggest managers are AMP Capital Investors, Colonial First State Global Asset Management, State Street Global Advisors Australia, and MLC Investment Management, the report said.

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Frequently Asked Questions about this Article…

Why are union-backed super funds calling for more transparency on fund manager fees?

Union-backed superannuation funds want new rules that require fund managers to disclose their exact pay packets. Research shows the sector earns $6.2 billion annually for managing Australia's retirement savings, but individual manager salaries are often kept secret. Greater transparency would help members understand who’s handling their money and how much they’re getting paid.

How much do fund managers typically earn managing superannuation assets?

Top fund managers contracted by super funds can earn anywhere from $500,000 to several million dollars a year. Despite these large payouts, the exact figures are rarely publicly disclosed, which has led to calls for more openness in the super industry.

What portion of superannuation fees actually goes to fund managers' pay?

Almost a third of the $20 billion that super members pay in fees yearly — about $6.2 billion — is passed on to fund managers. This hefty slice highlights the importance of understanding where your fees are going.

What new laws is the government planning regarding super fund fee transparency?

The government plans to push for some fund managers to repay bonuses if they underperform. However, it hasn’t yet committed to requiring full disclosure of all individual fees or manager remuneration, leaving room for further reforms.

What’s Industry Super Network’s stance on fee and executive pay disclosure?

ISN’s CEO, David Whiteley, believes members should know the names, backgrounds, and pay arrangements of both super fund executives and fund managers. He stresses this transparency builds trust and accountability across the entire superannuation ecosystem.

Who opposes the tougher fee disclosure rules and why?

The Financial Services Council, representing retail funds, argues that disclosing total investment fees is enough for members. They resist tougher rules, claiming detailed disclosure of individual manager pay isn’t as relevant to everyday investors.

Which big investment managers dominate the Australian super fund landscape?

Many of the largest investment managers in Australia are owned by major banks and financial houses. Key players include AMP Capital Investors, Colonial First State Global Asset Management, State Street Global Advisors Australia, MLC Investment Management, and the taxpayer-owned Future Fund.

What should everyday super members take away from the debate on fund manager fees?

Everyday investors should be aware that a significant chunk of their super fees goes towards paying fund managers, whose earnings are often hidden. Pushing for more transparency can help you make informed decisions about your retirement savings and ensure your money is managed fairly.