The superannuation industry has recently been overrun with ads for “ethical” super funds. Appealing to Gen Z, who are far more eco conscious than their predecessors. These funds are often more about selling morality than they are about your retirement. These funds promise that your retirement nest egg will support a greener future. They also fall short of supporting your retirement.
Although Gen Z are far more conscious than the generations before them, they are also some of the most financially inexperienced. The current education system provides little to no context to them about their super accounts or retirement. For many young people, the first time they interact with a super fund is via these ads promising ethical investments for their funds. The problem can be summarised quickly and concisely. Returns matter. They matter a great deal. These funds target young morals, whilst ignoring the fundamental purpose of the account in the first place. There is no amount of marketing that can change the fact these ethical funds consistently underperform.
If a company underperforms even by 1% when you are 25, that can be the difference of $365,000 by the time you hit retirement for the average person. That is a significant difference to your lifestyle. That’s the difference between comfortably heating your home in the winter and shivering because the pension can’t cover power bills. 42% of the elderly actively avoid using their heating due to the cost, 13% go without a heater all winter due to financial pressures. Many of these ethical funds are far underperforming 1% returns compared to regular funds.
There is even a lobby campaign to have them classified as a separate type of fund so that analysts aren’t able to compare them properly. If ethical funds are placed in their own category, analysts can’t compare their performance against regular funds. You can’t be seen as underperforming if no one is allowed to compare you. Let that sink in, they aren’t lobbying for improvements to environmental policy, social justice or anything like that. They are lobbying to ensure they can continue to sell you financial products marketed as “ethical”.
So if not ethical, then where has money been best placed?It can be cut a thousand different ways, and that’s exactly how many under performing funds keep attracting new customers. So let’s ignore the marketing noise and look at what actually matters. The returns. Last year the top 3 moderate funds by return were:
• LegalSuper (Returned 10.75%)
• HostPlus (Returned 9.63%)
• UniSuper (Returned 9.3%)
Now it is worth noting that although LegalSuper drastically outperformed everyone else, their performance was an outlier and their fees were very high. The same is true for HostPlus to a lesser degree.
Generally speaking one year results can be outliers, and data older than five years doesn’t always reflect how a fund is run today. No one should take performance as far back as 2015 with any real weight. Over a 3 year timeline, where data is still likely to be relevant, once we adjust for fees the top performers have been:
• HostPlus (Returned 9%)
• UniSuper (Returned 8.33%)
• AusSuper (Returned 8.15%)
Very similar themes appear when looking at high growth funds. Aware Super does enter the picture as a competitor.
Picking the correct fund is one of the most important decisions you will make in your life, and will likely need reviewing every 5 years or so. The difference of 1 or 2 percent can determine just how vulnerable you will be when you are elderly. Don’t trust your future to green gimmicks. Your superannuation exists to fund decades of your life after you retire.
For a regularly updated ranking list, you can go to – https://ozviz.com.au/super-rank/
Data for the Article provided by Finder.
Wealth Kingdom 
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