Bonuses for Fund Managers Face Changes with New Policy

Half of the money that goes into managing Australia’s superannuation funds reportedly goes to payments for fund managers. The funds are estimated to have reached about $1.3 trillion. 

The Australian Institute of Superannuation Trustees said some managers’ fees raked in $9.4 billion in revenues for the past year alone and investors complain their performance fees actually put them in a “win-win” position. 

Fund managers’ bonuses increase along with the sharemarket. Their salary packages, however, may be renegotiated when the market is bad. A large part of this renegotiation may include fixed pays. 

As a result, the government is bent on changing the rules as it is pushing for the imposition of new criteria for performance fees. 

This new policy is expected to roll out by July of next year, when the government introduces MySuper and when it plans to raise superannuation guarantees to 12 percent. 

A draft of MySuper actually suggests that fund managers may have to give back or repay previous bonuses they have incurred, especially when the market wasn’t doing well. 

Chief Executive Fiona Reynolds says that the draft seems to be going in the right direction. She agrees to the new criteria, saying fund managers should be rewarded with bonuses when they actually make considerable contributions to asset growth and demonstrate great performance. 

The bottom line is that the policy must work for the interest of the members and that they should be confident in paying performance fees to fund managers who have earned it. The popularity of self managed super funds has largely been due to discontent about high commissions and performance fees paid to fund managers.

The draft for MySuper was released last month.