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Australia’s superannuation funds are amongst the fastest growing in the world following more than a decade of compulsory contributions and there are a number of trends and challenges that they face.
‘Super’ Trends
A number of trends have affected the superannuation industry in Australia; there was the super system review of 2010 by Jeremy Cooper, financial market changes both locally and regionally and the global financial crisis (GFC). Although the ‘Cooper’ review was more geared around members and their interaction with superfund’s, the themes of the report (regulating efficiency, governance, systematic transparency and savings or dollar savings for members) still hold relevance to how superfund’s are managing their investments. The impact of the GFC has seen a resurgence of conservative asset classes such as the higher income type of investments, inflation linked investments and fixed income, where funds have a greater exposure to international equities. There has also been a move to more of the Alpha side of those funds as opposed to index tracking and international equity funds whilst exposure to alternatives and derivatives has declined or are more cautiously used.
Increasingly, super funds are seeking to gain competitive advantage and increase returns by bringing funds management in-house. This is not happening across the entire industry nor across all asset classes, but the more sophisticated super funds have begun to build up their internal teams to bring AUM in-house. This trend seems to be due to things like the cost of entering and exiting external funds, as well as those external funds MER; but it also gives them the ability to tailor a funds mandate to their own unique requirements while still keeping the IP in-house and proprietary. When you look at the in-house teams that some of these superannuation funds have built up, and the experience behind the personnel within those firms, it’s very clear to see there is an appetite to bring more of this management in-house in the future.
‘Super’ challenges
With an increased focus on reducing costs for members and the challenges of gaining positive returns in a diversified portfolio, super fund’s are increasingly looking for different ways to reduce their management costs without reducing the investment options to its members. Bringing funds in-house is one way that many super funds are achieving this, however this also comes with its own challenges:
‘Super’ technology
When looking at technology, superannuation firms should look for a front-office solution that has the ability to support its industry:
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Alex Kreger Founder and CEO at UXDA Financial UX Design
07 July
Nkahiseng Ralepeli VP of Product: Digital Assets at Absa Bank, CIB.
Sam Boboev Founder at Fintech Wrap Up
06 July
Roy Prayikulam SVP Risk & Fraud Division at INFORM GmbH
02 July
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