Superannuation fund members should move away from past performance and short-term results and focus on the long-term in order to get the most out of their funds.
“People have always been too focused on the short term. There is more focus on where the funds are sitting than anything else,” Ibbotson Associates managing director Daniel Needham told InvestorDaily.
“They should be focusing on underlying investment objectives and making sure that they’re consistent with what members need.”
The industry focus on short-term investment performance, including 12-month performance surveys, was risky, Needham said.
“Short-termism is a problem. Performance surveys used appropriately can be valuable tools, but the problem is that they have very little account for risk,” he said.
Super Ratings research manager Kirby Rappell agreed.
“It’s about taking the time. It’s very difficult, a lot of people are relatively passive in their super strategies, and [not] able to engage and take the time to see how [their] fund is performing against its peers or against a relevant index,” Rappell said.
“If you look at some of the funds in the industry now, it’s about outcomes based on what you’re putting in, how you’re going to look in 15, 20 or 30 years’ time.
“Obviously there are limitations there. [For example] you can’t guess what the market is going to do over that period, but it gives people a rough rule of thumb or guide to look at, which can be useful.”
In a recent white paper from Provisio Technologies, the advisory technology firm said it was now time for superannuation funds to focus on future results in annual statements rather than on past performance and short-term results.
“Short-term reporting encourages knee-jerk reactions, and we think that can cause bad decisions based on the wrong information,” Provisio co-founder and director Cameron O’Sullivan said.
“Rather than panic about a sudden downturn, investors should look ahead to find out what it means for the future. And our modelling shows that a dramatic short-term market slump can mean only a few dollars a week less in retirement income.”
