Forget The Fees You're Being Charged, The Net Returns On Investments Are More Important

Getty/Peter Macdiarmid

Australia’s venture capital industry says the overall performance of an investment is more important than the fees charged.

And the debate on superannuation fees should be reset with the focus shifted towards overall investment performance and net returns, according to the Australian Private Equity & Venture Capital Association Limited (AVCAL).

AVCAL made the point in its second round submission to the Financial System Inquiry.

“The interim report from the inquiry directed much of its attention to fee competition within the superannuation industry,” said AVCAL’s Chief Executive, Yasser El-Ansary.

“But what was missing was a comprehensive analysis of how the policy and regulatory system could change to shift more of the focus towards enhanced competition on net returns to fund members.

“Australia is perhaps the only developed market in the world that is still trapped in this policy and regulatory debate about fees and costs – other economies are focussed on net returns.”

AVCAL noted in its submission that Australian private equity outperformed the S&P/ASX 300 Index by 1.85 percentage points per annum over the fifteen years ending 2013 on a net-of-fee basis.

The amount of capital invested by Australian superannuation funds into the domestic private equity and venture capital industry is at 1% a relatively small part of the current superannuation savings pool of $1.8 trillion.

In the United States, the average allocation is close to 10%.

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