No correlation between MySuper risk and returns

Published on
July 9, 2019
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No correlation between MySuper risk and returns

No relationship can be found between the performance of MySuper products, their level of volatility and the riskiness of their underlying investments (recognised by growth asset weighting).

This is the key finding of the first Rainmaker Information RMetrics MySuper report, analysing MySuper performance alongside volatility over the three years to March 2019.

The results show that superannuation products need to be assessed individually to see whether they are achieving their investment objectives for members, as performance cannot be assumed relative to their level of risk.

In comparing the risk-adjusted returns of MySuper products, Rainmaker has developed the Combined Risk Adjusted Rank, assessing the performance of products alongside three measures of volatility.

Media Super, Hostplus, Cbus, Sunsuper and Club Plus' MySuper products were the top ranked according to their Combined Risk Adjusted Rank.

Rank Highest three-year return p.a. Lowest standard deviation2 Fewest negative returns Combined Risk Adjustment Rank


Hostplus EISS Super Club Plus Media Super


Media Super ESSSuper CareSuper Hostplus


AustralianSuper Maritime Super HESTA Cbus


Sunsuper3 Super SA Select Hostplus Sunsuper3


Club Plus PSSap Alcoa Super Club Plus

By assessing returns and performance against one another, Rainmaker discovered that the best returning MySuper products beat the lowest performing products by 70%1 and the volatility  differed by 80%2. Top performing funds are routinely delivering almost twice the returns of the lowest performing funds.

However, when comparing the returns of MySuper products when a monthly return fell below zero, the volatility tripled.

Looking at these results, Alex Dunnin, executive director of research at Rainmaker Information stated: "While returns are given the most attention, risk and volatility measures are important to consider as funds are not just aiming to achieve the greatest performance, they are aiming to protect the capital of their members by achieving consistent returns."

Over the same three year period it was found that the number of negative monthly returns varied from six to 14.

These figures illustrate that while super funds can have a negative return in a monthly period, there are funds that are able to mitigate risk and either reduce the negative impact in a given month or just avoid negative returns altogether.

Growth asset weighting is traditionally used as a measure of risk in a fund to highlight what percentage of the underlying investments are held in riskier asset classes, but given no correlation can be found between performance and growth asset weighting, Rainmaker believes it is time to develop a new conversation around risk-adjusted returns.

"Some funds are deliberately conservative because they have a lot of older members in their fund and they are more focused on downside protection, minimising volatility and capital protection," Dunnin said.

"We can now check to see if funds are achieving what they say they have set out to do using this analysis of performance and risk.

"Super funds need to be accurately communicating their strengths (relative to the market) to members and the RMetrics MySuper report will allow them to see where their performance and risk is actually placed."

1 - Performance compared over the three years to 31 March 2019

2 - Standard deviation is the most commonly used measure of volatility. It describes how much the monthly returns for each MySuper option vary around the average monthly return.

3 - While these are life cycle options, they operate as de facto single strategy options until members approach retirement.

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