AUSTRALIA - The influence of major asset consultants has risen dramatically in recent years, with their decisions increasingly determining superannuation fund investment returns and the retirement incomes of millions, actuaries have claimed.
Commenting on the implemented services offered by major Australian asset consultants, Rice Walker Actuaries said that superannuation trustees tended to seek advice from consultants even though they themselves were ultimately responsible for the investment of assets and selection of managers.
Rice Walker also found that the bulk of money in multi-employer funds such as master trusts and industry funds resides within a small number of multi-manager options, themselves invested using the advice of asset consultants.
Investors should understand the difference between good past performance as a reflection of positive decisions taken by the consultant, and good performance arising from coincidentally favourable investment conditions, the firm argued.
Rice Walker director Wayne Walker said: “A simple comparison of total past returns can mask what is actually occurring and lead to poor investment decisions.
“In some years, the major component of value added, or value subtracted, occurs from the implemented products finding themselves in underperforming asset classes simply because their investment structures remain tied to long term strategic asset allocations.
“A decision to purchase on the basis of strong returns that arose for these reasons is quite risky as you cannot be confident that the consultant will continue to capture added value in this way. It will depend on the relative performance of asset classes.”
Rice Walker are also advising trustees to measure the amount of added value achieved through manager selection. Results vary widely, and consultants, “can and do get this quite wrong from time to time,” said the firm.
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