Superannuation funds across all sectors of the market are failing to disclose the true cost of their investments to their members, according to Chant West.
The ratings firm estimates that a typical balanced fund with growth assets of 61 to 81 per cent masks a true cost by as much as 30 to 60 basis points.
Chant West attributes the opaque fee structures to the proliferation of fund-of-funds and alternative assets which often adopt multi-level fee structures and are expensive compared with traditional asset classes.
"Many investors are not aware of the different layers of fees and what their overall effect is on returns. Some trustees sign off on these exposures without a full understanding of the nature and scale of the costs," a research report from Chant West said.
Most funds also simply disclose the base and performance fees charged by the lead managers, while remaining silent on the fees charged by the underlying managers, according to the report.
"This is pressing problem for the industry and one that cannot be ignored, especially when allocations of fund-of-funds products are growing," the report said.
