Industry funds find a way to lure SMSFs

The Hostplus pooled investment product allows SMSFs to invest directly with the union-linked fund as they might in any other investment fund.
The Hostplus pooled investment product allows SMSFs to invest directly with the union-linked fund as they might in any other investment fund.

Self-managed super funds might never be the same again. One of the biggest experiments in the area — the launch of an SMSF “co-investing” product by industry fund Hostplus — is showing early signs of success among notoriously independent self-directed investors.

The Hostplus pooled investment product allows SMSFs to invest directly with the union-linked fund as they might in any other investment fund. With the $40 billion fund leading the performance tables over the last year, the prospects such a venture might win over SMSF money has always been strong. Moreover, any early success is very likely to copied by rival industry funds.

Paul Watson, group executive member experience at Hostplus — the industry fund for hospitality workers — says the “self-managed invest” option is running ahead of expectations.

“We officially opened in June and we are getting each day what we thought we might get each week,” says Watson. To put numbers on what Watson says, 780 SMSF funds have made inquiries about the product and 350 SMSFs have already invested.

“We offered the chance for SMSFs to invest in our best known products such as the balanced fund and income focused funds like the infrastructure fund — initially we had most interest in the balanced fund but I have noticed since the RBA cut rates the level of take up in the infrastructure related funds is rising,” Watson said.

Whether this early rush translates into long-term success for Hostplus it is too early to tell, but SMSF investors have so far been offered very restricted choices when it comes to high yield, unlisted products such as infrastructure funds. Most products offered to SMSFs require a minimum deposit of $25,000 to $50,000 — the Hostplus fund can be accessed for $10,000 with the non-profit funds able to offer low fees.

One of the most interesting developments is the inquiry level from financial advisers and dealer groups, which Watson says indicates financial planners are checking out the product to recommend to SMSF clients.

Top industry funds will be watching the experiment closely — in order to copy this pioneering venture, a fund would have to launch a pooled super fund which is an elaborate process.

Meanwhile, across the wider super sector, serious progress looks like being made on the abuse of salary sacrifice by the worst employers. A loophole which allows companies to count salary sacrifice contributions as part of the company’s own 9.5 per cent superannuation guarantee contribution is set to be closed with the arrival of the Treasury Laws Amendment bill 2019.

It is estimated the loophole has been an issue for an estimated 370,000 employees with the worst cases emerging in the small business sector.

Industry Super Australia, the umbrella consultancy group for industry funds, has been leading a campaign on the issue and also on the larger problem of unpaid super.

ISA has called on the government to make it mandatory to pay super at the same time as regular pay arrangements. Under current arrangements, super must only be paid by employers once a quarter, leaving scope for abuse of super contribution obligations.

“Federal politicians currently receive their super on payday — it’s time there was one rule for everyone,” said a statement from the ISA today.

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