Stockspots 2020 Fat Cat Funds report has stated that poor performance is largely due to higher fees, with CEO Chris Brycki highlighting to consumers they would be $200,000 better off if they are in a fund charging less than 1 per cent instead of paying 2 per cent.
“One of the golden rules of superannuation is: the less you pay, the more you get. Always pay less than 1 per cent p.a. in fees so your super isn’t eroded by high fees,” Mr Brycki advised consumers.
“Unfortunately, there are almost twice as many high-fee funds (more than 1 per cent p.a. in fees) than low-fee funds (less than 1 per cent p.a. in fees).”
Mr Brycki noted that people can be reticent to change, and even when they know they’re in a Fat Cat Fund prefer to turn a blind eye than spend the 10 minutes required to save themselves serious cash in the future.
“Sadly, in the eight years of naming the worst-performing Fat Cat Funds, few people have moved out of these funds.
“Retirement may seem a while away, but when you get there and realise you could have been $200,000 richer, it won’t be a good feeling.”
The Fat Cats
A superannuation fund is classified as a Fat Cat Fund if they are in the bottom 10 performing super funds within a particular risk group over five years.
The results showed AMP, OnePath and Macquarie are the three worst-performing funds for 2020.
“$5.5 billion of Aussies’ superannuation is sitting in the worst 40 Fat Cat Funds, costing them over $117 million in fees every year. A typical Fat Cat Fund charges 2.13 per cent in fees versus a Fit Cat Fund, which charges 0.97 per cent,” Mr Brycki said.
AMP has been a Fat Cat for eight years in a row, and in 2019 had approximately 1.5 million member accounts, according to ASIC.
AMP also made history by being the first Fat Cat Fund to have a super fund that delivered a negative return over five years, with one of their options delivering a total return of -2.2 per cent.
“The main factors that contribute to low-performing funds are a complex product suite, high fees and poor performing investment options,” Mr Brycki explained.
The Fit Cats
A superannuation fund is classified as a Fit Cat Fund if they are in the top 10 performing funds for a particular risk group over five years.
In 2020, Unisuper, who manages $80 billion of Australians’ superannuation investments, took out the Gold Fit Cat Fund award for the most top-performing funds over five years.
The silver award goes to IOOF, with four Fit Cat Funds, and the bronze award goes to Australia’s largest superannuation fund, AustralianSuper, who manages more than $160 billion for over 2 million members.
The one factor the top three Fit Cat Funds have in common is they all charge less than 1 per cent in fees per year.