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Super fund overhauls performance on red rating

After underperforming its peers and receiving a red rating from the regulator, an $11 billion superannuation fund is turning its performance around.

Mine Super initiated several strategic investment changes to its MySuper products, which are now delivering better performance and member outcomes, according to its investments lead.

These included reducing the investible universe to a number of sectors, simplifying the fund's structure, and rotating out of active positions and into lower cost, passive exposures, chief investment officer Seamus Collins said.

"This lowered operational risk and costs with headline investment savings to our members ranging from 14-26 bps (product dependent) and accrued through the 2019-2020 financial year providing a huge benefit for our members," he said.

The cost reductions consequently have benefitted members to the tune of $21 million per annum as at 30 June 2020.

In December last year, four of Mine Super's default lifecycle products were criticised for their unsatisfactory investment performance and relatively high fees based on APRA's heatmap metrics.

Maritime Super, LUCRF Super, and several BT Funds Management products such as Asgard's Employee MySuper, BT Super for Life and Westpac Group Plan MySuper, were some of the other MySuper products that were warned to do better.

Many of these products received a red rating based on a traffic-light system, whereby red is deemed to be the worst-possible rating.

Since the changes, Collins said the new strategies have proven to be effective. Consequently, the fund has improved its position relative to peers across four of the diversified products according to industry measures.

Chief executive Harry Mitchell spoke about the changes at a recent public hearing.

"On the last published dashboard, last December, in terms of colour we were in what would be described as the red. We were underperforming peers. That was prior to the significant restructure around our investments and our asset allocation and how we invest," he said.

Mitchell went on to say that the restructure is better aligned with member outcomes.

"It's part of a legacy situation in that the philosophy going back was very much about guarding and protecting capital. It was designed to try and perform better in downturns as opposed to outperform gross markets. The theory was to protect the capital and take gains where we get them. We've reviewed that and adjusted it slightly, going forward," he explained.

Member of Parliament Daniel Mulino asked Mitchell if he thinks the fund is better suited to the "market troubles" the world is facing at the moment.

While it is hard to predict future performance, Mitchell said, "It's really hard to predict future performance, but we're already seeing better performance and more relativity to peers across our various investment options. That would be correct."

Mine Super's member demographic typically works in the mining industry, with an average age of 46 years old and $180,000 in super.

Collins flagged that improved outcomes as a result of reduced investment fees and indirect costs will be reflected in APRA's next iteration of the heatmaps.

"We expect these benefits will continue to provide a positive impact to performance as they start flowing through to our longer-term investment performance horizons. In turn, this helps our members achieve a greater retirement outcome," Collins said.

This story was updated on September 22.

Read more: MySuperAPRAMine SuperSuperannuationAsgardBT Funds ManagementBT Super for LifeHarry MitchellLUCRF SuperMaritime SuperSeamus CollinsWestpac Group Plan MySuper
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