Summary: Australia's compulsory retirement saving system (aka superannuation, super) requires that 11% of employee earnings each year are invested till retirement age. There are hundreds of super funds that compete on performance, fees and options. Some funds offer clients who demand greater investment control the ability to choose their own investments from an Approved Investments Menu (aka Member Direct Option). In addition to ETFs, this investment menu may have LICs and LITs on it, but the ones selected, and the information provided, varies between super funds and they are typically equity LICs. I argue on this site that out of 89 ASX LICs/LITs only the 6 fixed interest LITs remain worthwhile.
Given I'm the only independent, genuine expert publishing content on ASX CEFs (LICs and LITs), I've decided to maintain a post reviewing the suitability of the LICs/LITs offered by the largest super trustees including: AustralianSuper, Australian Retirement Trust, Insignia Financial, Aware Super, UniSuper, AMP, Colonial First State, Hostplus, Cbus, HESTA and REST. I may also comment on any info published by the super funds about these LICs/LITs (e.g. fees).
In this post, I provide objective commentary on these super funds' LIC/LIT offerings and the extent of expertise and ongoing monitoring of their Approved Investments Menus. Initially, I'll focus on the investment menus from the Member Direct options (MDO) as this is the area most lacking oversight regarding LICs/LITs. It's time for a clean up of the neglected LIC/LIT "approved investments" aisle in the superannuation store.
Conclusion: All super funds have an incentive not to offer members individual investment product choice as they are then forced to charge much lower fees as they aren't doing the investment work. The super funds with large AUM certainly don't want to cannibalise their fee mills. Any Member Direct Options that exist from such funds are deliberately-crippled cousins designed to avoid losing some customers to SMSFs but not attract significant funds. LIC/LIT offerings are not kept updated (e.g. they don't offer justifiable ones like MXT, MOT, PCI, GCI, KKC, QRI). Some funds even offer LICs/LITs that have delisted, are suspended, or are uninvestible. Popular funds that used to have more LICs/LITs (e.g. AustralianSuper, HostPlus) are down to just 4 out of 89 as new demand for the sector dies off. Clearly, they're not recommending LICs as worthwhile investments! Not a single super fund has a LIC/LIT menu that I consider well chosen and expertly managed.
ETF offerings will continue replacing equity LICs. However, the superannuation sector wishes to justify its fees and so there is no effective guidance on building a simple, diversified, low-cost replacement (e.g. VAS/A200, VGS, VAF, VIF, VDHG) to the pre-mixed options super funds charge from 0.7% to 1.5% for. Vanguard Super is the cheapest full-service provider at 0.58%/yr. BT Super Invest provides the best DIY investment options at 0.15%/yr plus $580/yr admin.
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| After decades of neglect, someone's inspecting the super funds' LIC/LIT offerings |
Details:
1. AustralianSuper (2023 assets: $280b)
AustralianSuper has offered a Member Direct Option since 2011. In Oct 2023, it has 62 ETFs on its Approved Investment Menu but only 4 LICs/LITs left: AFI, ARG, BKI and MXT.
- I don't see the point of AustralianSuper offering 4 out of 89 LICs/LITs. Just get rid of all of them. Even AFI and ARG are unsuitable as they are subject to the issues I detail for AFI here.
2. Australian Retirement Trust
Australian Retirement Trust is the result of the merger of QSuper and Sunsuper. It does not offer a Member Direct Option.
3. Insignia Financial
Owns the MLC, IOOF and Plum super brands.
- MLC does not offer a Member Direct Option (thus no LICs/LITs). It offers a few selected Open End funds in the "Build your own portfolio" option.
- IOOF Super offers a Member Direct Option with managed funds, ASX 300 listed securities, ETFs and selected LICs/LITs including AFI, ARG, WLE, DJW, NBI, KKC, FGG, FGX, GVF, DUI, PMC, PL8, PIC, PE1, LSF
4. Aware Super
Aware Super does not offer a Member Direct Option among its investment options.
5. UniSuper
UniSuper does not offer a Member Direct Option among its investment options.
6. AMP
AMP offers the MyNorth Member Direct Option with 45 LICs/LITs on its MyNorth Investment Options menu (Nov 2023).
But these offered ones no longer exist: AEG, AIB, SVS. (AEG delisted Oct 2022)
BEL: Is suspended since Sept 2023. Tiny $3m net assets; 80% of holdings in Strike Resources; Expense Ratio over 20%!; Retail investors trapped by blocking stake preventing wind-up.
OEQ: Tiny $1.7m market cap; zero exit liquidity; invests in unlisted property.
7. Colonial First State
Colonial First State offers CFS Super with a Member Direct Option with ~230 Open End funds but no LICs/LITs. Clients with financial advisors can access CFS Edge with LICs and LITs available.
8. Hostplus
Hostplus has a Member Direct Option called Choiceplus. It's LIC List now only contains 3 LICs: AFI, BKI, MIR.
I don't see the point of offering 3 out of 89 LICs/LITs. Just get rid of all of them. See the issues I detail for AFI here.
9. Cbus
Cbus has a Member Direct Option called Cbus Self Managed. It offers over 32 ETFs but no LICs or LITs (possibly excepting the largest ones that qualify for the ASX 300, I've yet to confirm).
10. HESTA
HESTA does not offer a Member Direct Option among its investment options.
11. REST
REST does not offer a Member Direct Option among its investment options.
Smaller Super Funds:
From my review, it's clear the smaller funds offering LICs/LITs are not actively maintaining approved lists of the best ones across asset classes. If any of them were, you'd see credit class ones like MXT, MOT, PCI, GCI, KKC and QRI listed. Or to cover private equity and alternatives: PE1 and WMA. Instead, these are equity LIC offerings from years ago that are slowly being whittled down. Some approved lists (e.g. legalsuper) contain entirely inappropriate ones like OEQ or ones that no longer exist (BSN).
12. CareSuper
It's Member Direct Option is called the Direct Investment Option. It offers 46 ETFs but only 7 LICs/LITs: AFI, FGG, FGX, MFF, MIR, PMC, WAM.
13. ING Living Super
ING's Living Super product includes a Member Direct Option with 154 ETFs and 13 LICs. The LICs are: AFI, ARG, BKI, DJW, DUI, MIR, NSC, WAM, WLE, WHF, MFF, PIA, PMC.
14. legalsuper
It's Member Direct Option is called the Direct Investment Option. It contains 103 ETFs and 22 LICs/LITs: AFI, AMH, ARG, AUI, BKI, BSN, CAM, CDM, CIN, DJW, DUI, FGX, FOR, FSI, IBC, MIR, NGE, OEQ, PIC, WAM, WHF, WLE
15. Superhero Super
Superhero Super has a Member Direct Option called Control. It's Approved Product List contains 144 ETFs and 12 LICs/LITs: AFI, AMH, ARG, BKI, DJW, DUI, MIR, MFF, PIA, PMC, WAM, WHF.
Others: Mercer, NGS Super, Media Super, Macquarie, BT.
Links:
> Canstar: How to use the money in your super fund to buy shares and ETFs
> AFR: Millennials want their super invested in ETFs
