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Investment fees for the 12 months to 30 June 2021

Investment fees for most investment options for the 2020-21 year were different from that of the previous year.

In great news, management fees and costs and transaction costs were lower for the majority of our VicSuper members, one year on from the merger with Aware Super.

Some diversified options saw a higher total investment fee, which was driven by an increase in the performance-related costs for the year, as a result of strong performance.

Exceptional one-year returns: our FutureSaver default MySuper Growth option delivered over 18% for the year to 30 June 2021.

Investment fees can be broadly split into three categories:

  1. Management fees and costs, which include fees paid to investment managers to manage money, costs of the Aware Super Investment team, the management/ trustee charge, and other expenses associated with managing the fund’s investments such as custody fees.
  2. Performance-related costs, which are performance fees paid to investment managers.
  3. Transaction costs, which include costs relating to the purchase/sale of the assets of the fund like brokerage and stamp duty.

These fees and costs are paid from the assets of the investment option and underlying investment portfolios before unit prices and investment returns are calculated.

Tables 1 and 2 show the total investment fees broken down into these categories.

Investment fees vary from year to year and cannot be precisely calculated in advance. The amounts shown under the heading FY2020-21 in Tables 1 and 2 are the estimated fees and costs for the 12 months to 30 June 2021. In future, the amount you pay will depend on the option(s) you choose, and the fees and costs incurred by the trustee in managing that option.

Here’s a summary of the changes:

  • The management fees and costs, and transaction costs of the options were generally lower than, or in line with, the previous year. The increased size and scale of our fund helped to reduce these costs despite a volatile year in investment markets.
  • The Australian Shares option saw a considerable decrease in the investment fee as a result of the change from an active management to passive management approach on 1 November 2020. Passive management, by its nature, has lower investment costs than active management.
  • Performance-related costs increased for the diversified options and, in some cases, increased significantly.
  • Where total investment fees for the diversified options were higher, this was due to an increase in performance-related costs.

Performance-related costs

While VicSuper does not charge performance fees, we have performance fee arrangements with certain investment managers. Under these arrangements, performance fees are paid if the manager delivers performance above an agreed level. As these fees are dependent on the performance of the underlying managers, they can vary from year to year.

However, most of these performance fees are accrued and only paid on the realisation of an investment, so it’s possible not all these costs will end up getting paid.

The strong returns in FY2020-21 resulted in an increase in performance-related costs, particularly for options with higher allocations to unlisted asset classes such as private equity, property and infrastructure and real assets. More than half of the performance related costs in the Equity Growth, Growth and Balanced options were driven by the private equity asset class, which returned over 44% for the year to 30 June 2021 for these options.

Performance fee arrangements are common for these asset classes and it would be difficult to access certain investment opportunities without having performance fee arrangements in place with our investment managers. Performance fees can be used to align the investment outcomes of our members with the interests of our investment managers, by giving them an incentive to deliver strong performance. In other words, they get paid more when performance is high.

While we try to keep our fees and costs as low as possible, we believe investments in these asset classes are important as they help to diversify risk and enhance returns for our members over the long term (even after taking into account the total fees paid).

 

Table 1: FutureSaver and Flexible Income (with Transition to Retirement feature) - estimated investment fees (% per year)

FY 2019-201 FY2020-212
Investment options Management fees and costs % pa Performance related costs % pa Transaction costs % pa Total investment fees
FY2019-20 %
Management fees and costs % pa Performance related costs % pa Transaction costs % pa Total investments fees
FY2020-21 % pa
Equity Growth 0.49% 0.15% 0.14% 0.78% 0.40% 0.54% 0.08% 1.02%
Growth 0.47% 0.11% 0.15% 0.73% 0.40% 0.49% 0.07% 0.96%
Socially Conscious 0.36% 0.06% 0.13% 0.55% 0.36% 0.12% 0.09% 0.57%
Balanced 0.42% 0.07% 0.13% 0.62% 0.35% 0.43% 0.07% 0.85%
Capital Stable 0.36% 0.05% 0.11% 0.52% 0.30% 0.33% 0.05% 0.68%
Capital Secure 0.27% 0.00% 0.06% 0.33% 0.22% 0.10% 0.03% 0.35%
Australian Shares3 0.24% 0.00% 0.08% 0.32% 0.10% 0.00% 0.02% 0.12%
Cash 0.02% 0.00% 0.00% 0.02% 0.03% 0.00% 0.00% 0.03%
Term Deposit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1 The FY2019-20 investment fees reflect the estimated fees and costs for each investment option for the 12 months to 30 June 2020, apart from the Trustee charge (part of “Management fees and costs”) which was introduced on 1 November 2020 and reflects the amount charged from this date.
2 An estimate of implicit transaction costs, borrowing costs and property operating costs are not included in these amounts and are shown in the relevant PDS and member guide dated 1 November 2021 which will be available on our website vicsuper.com.au/pds from 1 November 2021.
3 The Australian Shares option changed from an active management to passive management approach on 1 November 2020. Passive management, by its nature, has lower investment costs than active management.


Table 2: Flexible Income (without Transition to Retirement feature) - estimated investment fees (% per year)

FY2019-201 FY2020-212
Investment options Management fees and costs % pa Performance related costs % pa Transaction costs % pa Total investment fees
FY2019-20 %
Management fees and costs % pa Performance related costs % pa Transaction costs % pa  Total investments fees
FY2020-21 % pa 
Equity Growth 0.60% 0.15% 0.14% 0.89% 0.52% 0.35% 0.08% 0.95%
Growth 0.58% 0.11% 0.15% 0.84% 0.49% 0.35% 0.07% 0.91%
Socially Conscious 0.47% 0.06% 0.13% 0.66% 0.41% 0.12% 0.09% 0.62%
Balanced 0.53% 0.07% 0.13% 0.73% 0.45% 0.30% 0.07% 0.82%
Capital Stable 0.47% 0.05% 0.11% 0.63% 0.40% 0.25% 0.05% 0.70%
Capital Secure 0.38% 0.00% 0.06% 0.44% 0.32% 0.10% 0.03% 0.45%
Australian Shares3 0.30% 0.00% 0.08% 0.38% 0.18% 0.00% 0.02% 0.20%
Cash 0.02% 0.00% 0.00% 0.02% 0.03% 0.00% 0.00% 0.03%
Term Deposit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

 

1 The FY2019-20 investment fees reflect the estimated fees and costs for each investment option for the 12 months to 30 June 2020, apart from the Management fee (part of “Management fees and costs”) which was introduced on 1 November 2020 and reflects the amount charged from this date.
2 An estimate of implicit transaction costs, borrowing costs and property operating costs are not included in these amounts and are shown in the PDS dated 1 November 2021 which will be available on our website vicsuper.com.au/pds from 1 November 2021.
3 The Australian Shares option changed from an active management to passive management approach on 1 November 2020. Passive management, by its nature, has lower investment costs than active management.
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