Short Sighted

Winston Churchill once said it is always wise to look ahead, but difficult to look further than you can see.

At the Association of Superannuation Funds Australia (ASFA) conference in Melbourne last week, Dr Keith Suter, a social and political commentator, noted that former politicians are often more impressive in retirement than when they were in power.

Why? Because, he says, they can take the long-term view.

Current politicians desperately need to win over the general population to stay in power.

They are forced to squabble for votes and politicise issues that would ordinarily receive bipartisan support, just to ensure their success at the next election.

This problem is largely due to the media’s excessive focus on comparatively minor issues, Suter says.

For example the recent spotlight on the number of asylum seekers arriving by boat, which is in fact only 4% of the total number of such asylum seekers globally.

The US, he points out, has a person entering the country, legally or illegally, every 18 seconds.

Politicians tell voters what they want to hear, not what they need to know.

Superannuation funds could not be accused of such a thing. They were, after all, entirely transparent in disclosing and communicating the impact of the global financial crisis to members.

But they could be blamed for not practising what they preach.

Investors, whether they are novices or experts, super fund members or retail mums and dads, are always encouraged to stay the course.

During the financial crisis, “time in, not timing” became the industry catch cry.

Perhaps it’s the fault of the ratings agencies. Even the Australian Prudential Regulation Authority (APRA) has jumped on board the league table bandwagon, publishing in August fund-level performance data for individual funds.

Or perhaps the media is to blame. MTAA was hammered in the Australian Financial Review after its high weighting to unlisted assets largely contributed to the -19.8% return on its balanced option in the year to September.

The return was noteworthy not just because it was the worst among the balanced funds, but because pre-crisis, MTAA had consistently ranked near the top of the performance tables.

Imagine for just a minute what the super industry might look like if super funds were truly able to take the long-term view.

If they could invest members’ assets on a 30 to 50 year time horizon without having to worry about the effect this might have on their annual league table ranking.

If they could invest knowing that a poor return one year would not prompt members to walk out the door.

Few people would argue that Choice of Fund or competition is bad for the super industry. But the unintended consequence it has had is to force funds to invest with one hand tied behind their back.

It would be a great shame if short-termism prevented the super industry from reaching its full potential.