Under a proposal from ASIC, Australian superannuation funds would have to disclose the asset allocation of their MySuper options on member statements and measure them against the average allocation of super funds in the Organisation for Economic Co-operation and Development (OECD) nations.
ASIC chair Greg Medcraft said Australian super funds were heavily invested in equities instead of bonds compared to pension funds in other countries, and should explain to members why they had chosen that strategy.
"I think it is really quite interesting to see that the average in the rest of the world is about 30 per cent to equities and when you contrast it with Australia it is substantially higher," Medcraft said at the Conference of Major Superannuation Funds 2012 in Brisbane earlier this week.
"I do think getting investors to focus on asset allocation is the first thing that is important.
"Getting them to focus on how that compares with the whole of the rest of the OECD is also something that is quite useful and [having] a debate to justify why the asset allocation is as it is in terms of a balanced fund."
The corporate regulator did not seek to bring the asset allocation of MySuper products in line with the average OECD asset allocation, but it was important to explain to members why a fund had adopted a different investment strategy, he said.
"It is providing a benchmark," he said.
"I think it will help a broader debate about asset allocation in the sector."
Some trustees expressed concerns over the difficulty in discussing asset allocation questions with super fund members, but Medcraft argued it would help transparency and member engagement.
The Australian Prudential Regulation Authority (APRA) will also scrutinise MySuper options that are consistently underperforming their peers on an after-fee basis.
"The financial interest of the MySuper member needs to be the major driver [of trustees' decisions]," APRA supervisory support division general manager Greg Brunner said.
"And from both a member's point of view and a regulatory point of view, the level of the trustees' success in meeting these obligations is fairly simple: has the trustee managed to secure outcomes for its MySuper members which are at least comparable with its peers or products with a similar risk profile?"
Brunner denied that this would spark a higher focus on peer risk.
"This is not to suggest that trustees should all engage in index hugging or seek to claim the products offered by their peers, however, it is likely that both APRA and members will look askance at trustees or products which produce consistent bottom-quartile net returns," he said.
Many super fund trustees and investment specialists agree the pressure to perform in line with other funds has caused the investment options of super funds to be largely similar, while their make-up has not changed much over the past 20 years.
Arguably, this has not been in the best interest of members.
A poll held during the conference found 50 per cent of trustees felt peer group considerations affected asset allocation decisions significantly, while 32 per cent said it affected their decisions marginally.
