The endemic use of headline returns to pit a superannuation fund's performance against another has renewed calls for a fairer, like-for-like comparison that focuses on risk as the key metric.
The propensity for research houses, the media - and even the Productivity Commission - to use average returns as the ultimate yardstick for outperformance has drawn the ire of some that are being unfairly compared.
Maritime Super was prompted to defend its MySuper option after it was named the "weakest performer" in an AFR article, bottoming the league table at 4.3% per annum, while rival super funds such as QSuper, UniSuper and Media Super blitzed the rankings, turning in returns of over 9% during FY19.
Maritime chief executive Peter Robertson panned the comparison, saying it fails to acknowledge the fact that the MySuper product minimises volatile returns for a large cohort of members who are close to retirement.
Adopting a conservative approach, Robertson explains, aims to protect these members' balances, meaning the investment strategy deployed has a lower allocation to growth assets compared to other MySuper options.
"The board's priority is delivering consistent long-term returns rather than outperformance in any one year or our position in a survey," he says.
Robert Brooks, deputy dean of education at Monash University, says members' risk preferences vary with several factors, including age and lifestyle expectations, and should be reflected in their investment strategy.
"This is where potential differences in returns and performance eventuate, because of the different risk profiles," he says.
Brooks co-authored research that finds while some super funds provide excellent returns, they tend to underplay the risks to members, and "use their own judgement" when it comes to classifying investments as 'growth' or 'defensive'.
"Looking at returns alone without factoring in the appropriate risk adjustment is the actual issue here," he says.
"The other issue is members who are not at the stage where they are investing for the long horizon want something safer, and on average will have lower returns and therefore lower volatility."
The challenge going forward is how to give members enough information about risk to make sensible investment decisions.
Rainmaker sought to fill this gap in its inaugural RMetrics MySuper report.
Examining the correlation between performance and volatility of MySuper products in the three years to March 2019, Rainmaker found the risk-return trade off within underlying investments does not necessarily compute.
There is a lack of relationship between the performance of MySuper products, volatility and the riskiness of underlying investments.
Media Super, Hostplus and Cbus topped the rankings using RMetrics' risk-adjusted modelling. Accounting for standard deviation makes EISS Super, ESSSuper and Maritime the best-performers.
While Maritime delivered lower returns compared to Hostplus for example, it does not necessarily mean it is underperforming, Rainmaker executive director of research Alex Dunnin says.
"Maritime, like WA Super and EISS Super, run their MySuper products differently to other funds and as a result, its performance can sometimes be unfairly compared," he says.
"The real question is whether a product is achieving its investment objectives."
APRA's looming member outcomes prudential standard SPS 515, which takes effect from January 2020, expects trustees to clearly articulate and measure their performance across a range of areas - including but not limited to - investment performance.
Investment performance, APRA says, should be "considered on a risk-adjusted basis net of investment..."
The Productivity Commission wants to "nudge" members to a shortlist of the best MySuper products. The list, although highly skewed toward investment strategy and performance, would also take into account fees, governance, innovation and insurance.
MTAA Super chief executive Leeanne Turner highlighted concerns the list emphasises "better net returns" and "high performing products" and neglects important elements of risk.
Pursuant to a proposed 'best in show' list, she says risk should be a "well-documented factor" embedded in a set of criteria to judge the best outcomes for members.
Risk - at the least - should be given equal priority to returns, Turner says.