Funds ‘accused’ of switching investments without member knowledge

couple whose super fund switch investments

Updated: Two leading superannuation funds have been quietly moving members from high-risk investment options into lower-risk investments – without the members’ knowledge, according to a media report.

The changes were first flagged by members complaining to News Corp’s wealth editor James Kirby on his podcast and are thought to have been spurred by rising inflation and the uncertain economic climate.

At Hostplus, one of Australia’s largest industry funds, senior investment staff have closed the top performing individual fund manager (IFM) investor funds to all members, including self-managed super funds that had previously been offered access to the investment stream.

Members may not have been aware of the changes, but a HostPlus spokesperson told YourLifeChoices: “Hostplus members and SMI investors were formally notified of this change in mid-February 2022, over four months before the closure of these options from 30 June 2022.

“Insinuating that our members were not informed is factually incorrect and potentially misleading in its inference.”

Meanwhile, at Aware Super, it’s claimed that managers are moving members from growth to conservative options unless members notify the fund within five weeks that they don’t wish to make the change.

Read: How to find out what your super fund invests in

Both Hostplus and Aware Super rank in the top 10 best performing funds in the annual Australian Prudential Regulation Authority (APRA) test.

With the very real risk of a global recession, funds are looking to redirect investments away from volatile asset classes and into safer havens, especially knowing they will need to pass the performance test again within 12 months.

It’s expected Hostplus and Aware won’t be the only funds moving members to low-risk options, so be sure to read any correspondence from your fund.

Hostplus says it made the decision to close the high-risk investment channel as it felt the investment streams were too concentrated in certain investment areas.

Read: Expert calls on retirees to spend more super

“These individual manager options consist of underlying investments that were managed by a single manager,” the company said in a statement.

“The fund felt this was inappropriate as these options were typically much less diversified – in terms of geographies, industries, sectors and manager styles – than the broader asset classes they generally invest in.

“The fund believes that greater diversification, and a reduced single manager concentration risk, is more appropriate and likely to better support long-term, risk-adjusted returns being achieved by members and investors.’”

Aware Super was formed from the amalgamation of First State Super, WA Super and VicSuper and has around $152 billion under management on behalf of 1.1 million members. It’s estimated around 400,000 Aware members have been affected by the investment switch.

Read: Changes to downsizer contribution age

While moves to reduce risk for members may be applauded in some circles, other investors are not so happy about being moved with little to no notice.

“What appals me is that my superannuation fund has now introduced a risk factor – they are going to do something I don’t want,” said one Aware member.

“They have not asked me if I want this change and have only provided me with an opt-out option.”

If you are a Hostplus or Aware Super member, check your current investment settings to make sure you’re still where you want to be.

Are you with Hostplus or Aware Super? Are the fund managers doing the right thing? Let us know in the comments section below.

Update: HostPlus spokesperson comment added 12 October at 9.48am. Aware Super has yet to provide a response.

Written by Brad Lockyer

Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.

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