The fastest ride won't suit every passenger

IT'S fun to browse the Top Gear Power Laps board - the list of the lap times set by the show's tame racing driver, The Stig, around the Top Gear test track. Well, it's more fun than perusing the performance league tables for superannuation funds.

Yet both sets of performance figures have a lot in common. We can learn some of the same things from both sources of information but, critically, there are some things that neither set of information gives us any idea about.

And whether we're a superannuation fund member or in the market for a new car, we need to know about much more than just one dimension of a product before we can make a smart choice.

Which makes a plan by the superannuation industry regulator, the Australian Prudential Regulation Authority, to produce its own performance statistics for super funds a little bit perplexing.

It has groups that already produce fund performance data, as well as the fund management industry's representative body, the Investment and Financial Services Association, scratching their heads.

For the record, the fastest Top Gear lap time so far by a "road car" (they stretch the definition a bit, sometimes) is 1 minute, 17.1 seconds, by the Gumpert Apollo S. Only five cars have broken the 1:18 barrier: the Gumpert, the Ascari A10, the Koenigsegg CCX, the Pagani Zonda Roadster F and the Caterham Seven Superlight R500.

If you were to look at only these lap times, you could conclude that these are the best cars to have been on the track. However, that is only true if "best" equates to "fastest". That is like looking at super fund performance tables and concluding that the fund with the "highest return" is the "best" fund.

With superannuation, as with cars, the definition of "best" is variable. It has to take into account more than performance. For example, the Gumpert might be the fastest (and have the most ridiculous name) but it is no use whatsoever for everyday driving. It is uncomfortable on normal roads, it has no luggage space and it has two "seats" (it stretches the definition again).

Similarly, the best-performing superannuation fund might be invested in incredibly risky assets that happen to have done particularly well for the period in question. The fund might just as easily post a very large negative return in the future.

There is concern in the industry that APRA's plan to publish its own performance tables could be tantamount to handing fund members a list of lap times and asking them to work out whether the cars in question are two-seater sports cars, family cars, station wagons, four-wheel-drives or utes.

When it comes to cars and super funds, the definition of "best" depends on what purpose the product is intended to fulfil.

The Ascari and Zonda are fast, but if you wanted to pack up the family and head off on holiday maybe an Audi RS4 Avant is a better choice (it is said to have lapped the Top Gear track in 1:25.7, putting it only 41st*).

The point is, no single measurement - least of all a lap time - adequately describes each car's suitability for particular purposes. And exactly the same is true of superannuation funds. The "best performing" fund over a one-year period (like one lap of a race track) is not necessarily the fund that is best suited to your needs. There is a host of considerations to take into account.

APRA is planning to extend its range of publications to include superannuation fund performance. But a discussion paper it released in November has sparked concern among fund managers and superannuation funds that how APRA plans to report returns might give members a misleading picture.

IFSA supports "the publication of reliable and relevant performance data which reflects the investment experience of members and helps them make informed choices".

But it adds: "The information that would be of most value to members and the market is investment option performance data, which will allow superannuation members to compare the performance of their option within their product with that of similar options within other products."

One of its main concerns is APRA's plan to calculate fund returns using a measurement called "return on assets", or RoA. APRA says the RoA is the net earnings after tax, divided by the fund's average assets for the period.

But the argument against this method is that it generates information at too high a level. IFSA says that for any data to be meaningful to members, it must reflect how their money is actually invested, and thereby enable like-with-like comparisons - with similar investments in other super funds.

"The industry is concerned that there is a real risk that APRA's publication will misrepresent the industry, be misinterpreted by the media and mislead superannuation members," the IFSA submission says.

Its deputy chief executive, John O'Shaughnessy, says it is a good idea for a body such as APRA to be involved in publishing fund performance figures. "The issue with what's published now is that they don't always cover 100 per cent of the funds on offer," O'Shaughnessy says. "A number of [fund monitors], including Chant West and SuperRatings, are subscription-accessible. So it's difficult for a consumer to understand where they are at the moment versus what's available in the marketplace."

A key issue is that APRA wants to base its calculations of fund performance on data it already collects. APRA is a prudential regulator - its primary role is to ensure and maintain the financial integrity of the superannuation system, and it collects data that helps it achieve that goal the investment performance of the funds it oversees has never been a primary concern. For that reason IFSA and others in the industry think the data APRA has cannot be detailed enough.

The IFSA submission handily summaries how superannuation can be analysed at five levels. The detail increases at each level.

The broadest, top level is the industry. At this level we can say that the superannuation industry had assets of $1.15 trillion at the end of September.

The next is the sector level. The industry is made up of four broad sectors: corporate funds, industry funds, retail funds and public-sector funds.

The third level is the trust or fund level. At this level are entities such as Sunsuper, Colonial First State FirstChoice Superannuation Trust, and ING MasterFund.

Then, at the fourth level, is range of products under each fund or trust. For example, Sunsuper has Sunsuper Solutions, Sunsuper Pension Options and Sunsuper Corporate.

Finally, at the fifth level, there are the investment options available under each product. IFSA says hundreds of options may available to super members.

At the moment, APRA collects data at a trust level, not at the product and investment options levels. These levels are most useful to members but APRA will only publish performance figures that aggregate all this data.

"Our main concern is that the aggregation doesn't get to a level that helps consumers make a wiser decision," O'Shaughnessy says. In addition, because of APRA's reporting process, performance data could be as much as nine months' old when published.

The managing director of SuperRatings, Jeff Bresnahan, says he is not concerned by APRA's entry onto his turf. "It cannot possibly work and have any meaning if it's done at the fund level or the trust level."

Bresnahan says SuperRatings collects data on about 8000 investment options a month, and spends considerable time and brainpower ensuring that, when it reports returns, it compares like with like.

*Top Gear's host, Jeremy Clarkson, mentioned the RS4's lap time of "1 minute, 25-point-something", and the fact that it was "more than a second quicker" than the Porsche Cayman S's lap time of 1:26.7.