- Seven $100bn+ mega funds well clear of pack but ’second six’ experience strong growth
- FY 23 saw an average investment return of 8.62% – and the sector saw a 7.6% rise in AUM to over $3.5 trillion.
- KPMG analysis shows sector needs to focus on net returns, competitive fees and fund sustainability.
- Trend to mergers slows, but is expected to rebound as sustainability concerns increase.
Australia’s super sector provided impressive investment returns to members in the year to 30 June 2023, sharply reversing the stagnation of the previous 12 months, KPMG’s annual Super Insights report, this year prepared with Chant West, has revealed. The sector, excluding SMSFs, grew by 7.6% last year, while investment returns to members rose to 8.62%, up from -3.09% a year earlier.
While Australian Super and ART have consolidated their position as the largest of the seven ‘mega-funds’ worth over $100bn, there is also movement in the cohort below, where a set of six funds with assets of $60-100bn saw 20% growth. As Australia’s super sector continues to stratify, the ‘second six’ have pulled well clear of the remaining pack, with the 14th largest fund a long way below, at $38bn.
Of the seven mega funds, 3 are industry funds, 3 are retail and one is public sector.
Linda Elkins, KPMG National Sector Leader – Asset & Wealth Management, said: ”After 30 years of Super Guarantee and 10 years of the MySuper regime, it is an appropriate time to look at what is being delivered. We believe member outcomes have been strengthened with strong net investment returns and improved fee arrangements.”
“But the issue that will concern the sector the most is sustainability – the flow of members is going to a limited number of funds and some are in a net cash outflow position. While the merger activity of recent years slowed a little in FY23, we anticipate this picking up again.”
On the key issue of retirement, the report shows the continued dominance of retail funds with access to advice, but industry funds are still edging up in market share as they retain more members into the pension phase. This re-iterates the importance of funds developing retirement products services to meet their retired members needs.
Linda Elkins said: “Overall, super gets a great report card but with some ongoing areas of improvement – funds need to keep up member services and retirement solutions but also be on top of cost management and regulatory reform. We welcome the announcement that Superannuation Guarantee will be paid on parental leave payments and hope both Government and industry will continue to focus on gender equity, superannuation for First Nations people and care for vulnerable customers. This will ensure super is super for everyone.”
KPMG found that investment performance was strong across the board in FY23 with the gap between the best performing fund and the average falling from 4.66% to 3.62%. It found that while Australia’s largest seven funds had outperformed the rest over 1, 5 and 10 years, the investment performance data had no clear evidence as to the optimum level of scale for a fund, which are all at different stages of maturity.
It also found that the average account balance had grown from $90,783 to $97,154 due to strong returns and the legislated increase in Super Guarantee (SG) contributions.
View Super Insights 2024
