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Frank wrote on Nov 28^th, 2023 at 5:35pm:

Australia’s biggest super funds have been put on notice about misleading consumers, and not a moment too soon.

A surprise fine handed out to the industry fund, Hesta, over potentially misleading marketing of its investment returns comes as the sector is under pressure to come clean on how it achieves and presents returns.

Hesta, which is focused on the healthcare sector, has been penalised by the Australian Securities & Investments Commission for ‘‘statements that may have misled consumers’’ concerning its balanced growth fund. Balanced funds are the most popular among Australian consumers and also the source of ongoing controversy inside the sector.

Hesta had advertised the fund’s returns over a 10-year period – but failed to point out which 10-year period. ASIC says consumers may have ‘‘assumed the fund was performing better than it was’’.

Specifically, Hesta said its balanced growth option “returned 8.87 per cent average returns pa over the past 10 years”, but ASIC pointed out the average return for the 10-year period at the time of the advertisements was lower, ranging from 8.01 to 8.51 per cent.

Hesta’s infringement notice is an embarrassment to the fund – though the accompanying fine of $48,600 hardly matters to an ­operation with $74bn under ­management.
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Under existing ASIC guidance a balanced fund is a “fund that invests across a mix of asset classes like cash, fixed interest investments, property and shares, to achieve medium-to-long term capital growth and a reasonable level of income”.

In other words, big funds are free to design their ‘‘balanced’’ funds just about any way they wish as long as they satisfy a criterion badly lacking detail. This is the biggest issue in how super fund returns are presented. How the outcomes are advertised is actually a secondary issue.


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