How are winners made?

By Penny Pryor
Kirby Rappell SuperRatings

The number of funds might have tripled, but the basic criteria behind SuperRatings assessment for its Fund of the Year awards hasn't changed. What has changed, are the ways those metrics are measured and how they take into account the different trends of the times.

The basic factors that are considered are:

> Investment 22.5%

> Fees 22.5%

> Member servicing 10%

> Insurance 10%

> Governance 10%

> Administration 10%

> Qualitative assessment 15%

When ARF received the first Fund of the Year award for 2005, SuperRatings was only rating 30 funds. That number has now more than tripled to 105 MySuper products.

Kirby Rappell "In terms of the things we look at, at a high level they've remained pretty constant ... but the way we look at investments [etc.] has changed," SuperRatings research manager, Kirby Rappell (pictured), says.

For example, a few years ago the organisation started looking at investment returns on a more long-term basis and now gives 10-year performance a higher weighting, whereas previously the five year numbers were weighted higher.

Risk is an important factor too.

"Obviously, by having the greatest return [but] taking on more and more risk is not in the members' interests," Rappell says.

In recent years more super funds have added member direct options - the ability to chose your own shares etc - to their investment line-up and this has necessitated new considerations around the variety in the investment menu.

"We didn't do that a few years ago," Rappell, who has been with the firm six years, says.

When it comes to the fee structure, three years ago the research team started looking at how equitable the fee structure was. As well as examining the fees on a $5,000, $50,000 and $100,000 balance, they also now look at the fees incurred on the average account balance.

The buy/sell margins, and switching and withdrawal fees, if they are still levied, are also considered.

Last year SuperRatings changed the advice component to member servicing and now it also rates how easy it is for a member to interact with the fund. It examines the educational tools available, such as seminars, and has recently shifted the weighting away from just straightforward advice.

HOSTPLUS For the administration component, SuperRatings establishes an in-house view of each administrator that funds use and conducts a site visit of their premises every 12 to 18 months, along with a questionnaire survey.

"We do think that's really important," Rappell says.

Over the decade the examination of insurance has shifted from reliance on rates and fees to include the claims experience.

"At the moment insurance is a real challenge. Some people are experiencing problems with their claims," Rappell says.

So it's become even more important for SuperRatings to examine the terms and conditions in the coverage available to members.

Governance has always accounted for 10% of the rating but the way it is assessed has changed.

Rappell says they pay great attention to how easy, or hard, it is for members to find out the fund's governance practices. For example, how easily a fund's proxy voting policy can be easily tracked down, is an issue that needs to be considered.

REST The qualitative assumptions - or the last 15% - are a result of extensive site visits to the funds.

"We spend about three to four months on the road. We go and visit pretty much every fund," Rappell says.

"[We look at] how their business is going, we're looking at the culture of the business, looking at their management team. All the data gives you a view of the fund but obviously you need to tweak that through qualitative assessment."

There is also an accumulation and pension category now, in addition to the Fund of the Year but when the awards are announced on October 14, the recipients should take comfort in the fact that the judging, along with their funds, is keeping up with the times.

(Pictured above: From the archives, 2007 Fund of the Year, HOSTPLUS & 2014 Fund of the Year, REST.)

Figure 1: 10 years of winners

10 years of winners

Source: SuperRatings

View the complete list of 2015 Award Nominees