What retail superfunds invest in

Real Wealth opinon

Posted March 7th, 2016 at 9:23 AM

Despite Retail Super funds carrying a vast amount of Australian’s happy retirement, relatively few people actually understand what they’re invested in.

A retail Superfund will generally have a team of Investment Managers.These are the nameless and faceless people you’ll never meet, who are paid mega bucks.Investment Managers decide where to invest your funds.

A mandate tells the Investment Managers what they can and cannot do. They invest your funds according to what’s known as asset allocation. One of the crucial areas where Investment Managers are mandated is this asset allocation.

Here’s what the asset allocation looks like for a retail superfund:

Asset Allocation Example
Cash Cash in the bank - makes 0%
Equities Australian and international shares
Property Property trusts, not housing
Fixed Interest Government Bonds, Fixed interest - like a term deposit
Other Other managed funds
Commodities Gold, Oil, Silver, Iron Ore

According to the latest APRA report released in December 2015, if you’re in a retail superfund, here’s what the current asset allocation breakdown is:

Asset Allocation Percentage allocation
Cash 14%
Equities 50%
Property 7%
Fixed Interest 23%
Other 4%
Commodities 0%

One of the problems with being mandated is that Investment Managers have to be invested in these areas no matter the market conditions. So unlike modern portfolios that can liquidate positions and hold in cash when the markets turn south, mandated retail super funds have to ride it out.

Riding it out is what you would have done in the GFC and it’s what you’ll do when the next GFC hits if you remain in a retail super fund. As soon as market volatility hits and super starts dropping, expect to see articles such as this in the media:

Luckily, people are starting to cotton on to the fact that you don’t have to ride it out. People are flocking in their thousands to retail superfund alternatives such as wholesale managed super. These funds offer the investment managers much greater flexibility and will often hold large allocations in cash during times of volatility.

If you'd like to know more information -

Phil N March 7, 2016 at 7:30 PM

It's ridiculous that people think that the only funds available are retail super, I set up a SMSF years ago and never looked back.

Anon March 7, 2016 at 8:30 PM

What a rubbish article

Phil N March 7, 2016 at 8:44 PM

What a stupid comment.

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