Put risk on the super comparison table: AMP

As APRA prepares its traffic light rating system for super funds, AMP's head of wealth warns risk needs to be on the table to ensure consumers compare apples with apples.

Chief executive of AMP's Australian wealth management division Alex Wade has warned the prudential regulator of the enormity of its traffic light rating system for superannuation funds, calling for APRA and the super industry to unite in the hope of finding a method to accurately compare funds despite their varying levels of risk.

According to Wade, APRA's new super rating system - which will rate funds using red, amber and green traffic lights or heat maps - needs to go beyond returns, fees and charges, sustainability and insurance, and include risk.

Wade noted that different members have different risk appetites, and that as such consumers needed to be able to understand the level of risk their fund actually took on. If a fund was to be rated green - and therefore endorsed - he believes consumers should be able to consider its level of risk.

"Currently, there are no standard guidelines for classification of growth and defensive assets in superannuation. This makes it particularly difficult for consumers to make apples with apples comparisons when trying to assess performance in line with risk," Wade said.

Wade pointed to how several funds had increased their exposure to unlisted property and infrastructure under the guise of making a defensive allocation.

Despite their recent positive performance, Wade said those investments lacked transparency and might carry "considerable risk" in a downturn.

"APRA needs to come up with a system to accurately compare funds - risk should be firmly on the table and reflected in the comparisons," he said.

"We acknowledge that this is not an easy task for APRA, given the industry itself has debated with this issue for some time.

"As an industry we must all start working together to find and agree to the right methodology that makes it easier for Australians to accurately compare their super products. We're not there yet."

Rainmaker research of a sample of AMP's MySuper lifestage shows it performs broadly in line with the industry average, achieving returns of 7.8%, 7.7% and 4.9% over five years across the 20-29, 40-49 and 60-69 age groups respectively, compared with the industry averages of 7.7%, 7.5% and 5.4%.

Its MySuper single strategy product fetches 7.3% over five years, slightly under the industry average of 7.7%.

Read more: SuperAPRAAMPSuperannuationMySuperAlex Wade
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