Super funds come under more scrutiny

By Philip Macalister, ShareChat Business News Editor

Friday 11th June 2004

Both the Commerce Commission and the Securities Commission are planning to meet with the Consumers� Institute next week to listen to allegations fund managers have been misleading investors over returns.

This month the institute�s magazine Consumer published an article heavily critical of the performance of superannuation funds.

In its report Consumer claims that high fees charged by managers of diversified funds have strongly eroded investors� returns.

It says people would have been better putting their money into bank accounts over the past 10 years as opposed to investing in these funds that hold a diversified portfolio of assets.

Securities Commission counsel Liam Mason has confirmed a meeting is taking place next week. However he would not comment on what he expected to happen or the purpose of the meeting. Commerce Commission director of Fair Trading, Deborah Battell, was likewise circumspect saying that it was a preliminary meeting to hear what the institute had to say.

She says it was the commission�s job to �investigate allegations� when they are made. She also indicated the commission was interested in the issue from a Fair Trading point of view.

One of the institute�s main concerns is that fund managers continue to advertise that they will outperform certain benchmarks over time, however history indicates they haven�t been achieving these goals.

It says such claims are misleading.

The report has been roundly criticised by the funds management industry.

Tower�s chief executive investment businesses, Paul Bevin described the report as �a sloppy piece of work� and felt that the fund management industry didn�t have a case to answer.

Even the company that supplied data for the survey, FundSource, is openly critical and is distancing itself from the article.

FundSource executive chairman David van Schaardenburg says that he doesn�t agree with the findings.

He says it seems as though the institute had an agenda and made a case to fit.

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