Industry Funds Win
Concern over AIRC's select hand-picked Industry Super Funds
SPEAKING of special privileges, news that the Australian Industrial Relations Commission has favoured some industry funds by making them the default superannuation choice in certain awards is of great concern.
Many in the sector believe that, due to the burdens of bureaucracy, cost and laziness, this decision means that much of the 9 per cent mandated superannuation money will flow to these funds because, as a default choice, they represent the path of least resistance. So much for the concept of choice.
This is a huge windfall for a sector I am already suspicious of.
My first suspicion is that these industry funds are not as efficient as they say they are. They have spent huge amounts of money advertising how their lower fees lead to better long-term performances.
But many industry funds have also been heavily exposed to infrastructure investments, which are much less transparent than typical retail investment funds that concentrate on shares and bonds. As the investment sector deals with the seismic shift in the markets, expect heavy losses to emerge in infrastructure.
Another, much darker, suspicion is that some of these industry funds are aligned to political forces - such as unions or particular industries - which means they may find it hard to separate their investment philosophies from other ideologies.
I hear alarm bells ring when the federal government, via the AIRC, decides to favour such a segment of the economy.
Is the government directing super money towards some organisations run by like-minded people? Possibly even its buddies or those it would like to reward for past service?
Will some of these funds act to support government policy ahead of looking after their members?
That could occur in investing in infrastructure in certain locations or of a certain type.
Or it could result in investment in companies that reflect a certain way of thinking, without its members realising the cost to them in retirement.
If an elected government wants to deliver change it ought to make laws to achieve that.
It should not seek a backdoor way by pushing mandated superannuation funds in the direction of its unelected mates.
It's another version of robbing Peter to pay Paul.