Stockspot, a fintech automated investment adviser, has released its 2016 Fat Cat Funds Report, revealing Australia’s underperforming superannuation and managed funds.
The report analyses 3,820 funds, highlighting high fees, poor transparency and conflicts of interest in Australia’s investment industry and the impact on long-term savings.
“We estimate one in 20 Australians could be stuck in a Fat Cat Fund,” says Chris Brycki, Stockspot CEO and founder. “Australians deserve greater visibility over where their money is invested and how it is performing.”
Stockpot estimates that the big four banks and AMP control the majority of the 638 underperforming Fat Cat Funds being paid about $777 million paid in fees every year.
To be a Fat Cat, the fund has to be seriously underperforming over one, three and five year periods and by 10% or more.
These funds are charging 2.04% of the value of the fund in fees each year. At the other end of the scale, a Fit Cat Fund charges only 0.94% on average.
This means that a 30-year-old of today might lose nearly a quarter (24%) of their lifetime super if their money is in an average Fat Cat Fund.
Men could lose $285,208 and women $232,514. Those in their 50s could lose $100,000 in the years leading up to retirement.
Here are the funds at the top of the Fat Cat list for 2016:
Stockspot also highlights 574 Fit Cat Funds that have performed well and delivered better results than their peers.
Here are those funds which have outperformed their peers over 1, 3 and 5 years and by more than 10%:
Stockspot believes government should intervene.
It wants government to require all superannuation and managed fund products to provide fee and performance data to a comparison website.
Here’s how the Fat Cats compare to the Fit Cats when it comes to performance:
And if you’re tossing up whether to plump for an industry or retail super fund, here’s how they compare on fees:
Stockspot also supports the idea of a public tender for the right to manage default super funds.
“Superannuation is the single most important savings pot we will have in our life, so surely this is an issue that needs Government intervention,” says Brycki.
“A public tender for the right to manage default super funds has the potential to halve fees. Chile’s established public tenders for the right to manage default super funds has reduced average annual super fees to 0.30% versus average fees of over 1.0% in Australia.”
A national auction for the right to run Australia’s default superannuation fund as a way to reduce fees and increase returns to wage earners is being considered in a review by the Productivity Commission.