A tough year on global markets resulted in overall funds under management in Australia falling, but the not-for-profit superannuation sector bucked the trend and grew.

Figures produced by research group DEXX&R found that overall funds under management in the Australian market declined by 9.9 per cent to $1.36 trillion in the 12 months to September.

The drop was caused by a range of factors including sharemarket falls and customers withdrawing funds from managed funds outside superannuation.

DEXX&R analyst Adam Rogers said the results for the year were “a massive turnaround from the 19.8 per cent increase in funds under management [FUM] recorded in the year to September 2021”.

Those overall figures include superannuation and other managed investments, but do not include bank accounts.

Across the superannuation sector FUM performance varied between fund types.

The not-for-profit sector, which includes industry and public sector funds, managed to record a small rise of 0.2 per cent. This pushed the total under management to $1.41 trillion.

The top 10 industry and public sector funds gained 7.9 per cent. Much of the gains in that sector came from industry giants, AustralianSuper and Australian Retirement Trust, which increased FUM by 11.5 per cent and 7.2 per cent respectively.

That performance came despite a decline for the median balanced fund, where most members have their money, of 5.4 per cent for the September year, according to Chant West researcher Mano Mohankumar.

For-profit super losses

For-profit retail super funds under management lost 12.03 per cent in FUM. The largest two in that sector, BT and Colonial First State, saw declines of 28.49 and 12.73 respectively.

The strong falls in retail FUM are driven by ongoing fallout from the Hayne banking royal commission back in 2018, Mr Rogers said.

“Negative publicity resulting from the poor behaviour of retail funds uncovered by the commission has resulted in funds continuing to leave the retail sector,” Mr Rogers said.

DEXX&R figures also show how concentrated the superannuation sector is becoming.

The top 14 superannuation funds by value account for 80 per cent of all superannuation monies.

The top two funds, industry giants AustralianSuper and Australian Retirement Trust – the latter formed last year by the merger of two Queensland funds, QSuper and Sunsuper – alone account for 25 per cent of super funds under management.

The next seven funds account for a further 31 per cent.

QSuper and Sunsuper are listed separately in DEXX&R’s table because their merger wasn’t complete when the figures were done. However, together they make up second place in the super sector and are presented as such in the bar chart below.

There was one area of super that did decline overall regardless of fund type.

Retirement funds, which include super in pension mode and annuities which are paying out to retirees, lost ground.

Over the 12 months to September 2022 retirement income FUM decreased by 8.8 per cent ($17.8 billion). It fell from $202.2 billion at September 2021 to $184.5 billion a year on.

Of the combined asset class, allocated pensions FUM decreased by 9.6 per cent or $18 billion to $170 billion at September 2022.

“The decline was the result of funds paying out income to retirees at a time when investment returns were negative,” Mr Rogers said.

Retirement funds also took a dive from 2019 when new legislation limited the amount able to be held in tax-free pension mode to a cap which sits at $1.7 million.

Alternative asset classes

Not-for-profit funds did remarkably well when the performance of their market-linked investments is taken into account for the September year.

“International bonds and shares declined 12.8 per cent and 15.7 per cent respectively, while local bonds and shares declined 11.4 per cent and 8 per cent respectively,” Mr Mohankumar said.

Industry and public sector funds managed to do much better than those figures show because of their increasingly large allocations to alternative asset classes.

These include private equity, infrastructure and unlisted property and they declined by far lower margins than listed products.

Corporate super funds lost ground, falling by 5.3 per cent or $8.2 billion to a total of $145.2 billion.

Those funds have been in decline for some times as employers increasingly give up the responsibility of managing their employees’ super, handing it over to industry and retail funds instead.

The New Daily is owned by Industry Super Holdings