LGS Super’s decision to expand the number of exchange-traded funds (ETFs) through its DIY investment option was in response to a small group of members who may have been considering moving to a self-managed super fund.
The $8.9 billion fund increased the number of ETFs offered through its direct investments option from 13 to 28, so that those who wanted greater control could have it through the super fund.
LGS Super now offers eight ETF options through iShares, seven through Vanguard, four through State Street, three through Russell Investments, three through Market Vectors, two through BetaShares and one through ETFS Metal Securities.
According to Peter Lambert, chief executive of LGS Super, while the take-up of ETFs has been low, feedback from the members was that the range had been too narrow, which had led to the introduction of the 15 new options.
“There could have been a much wider range, but we went through the suit and only offered ones where there was a reasonable expectation that members understood the complexity of the product they were getting into,” Lambert said.
He added that those who opted to self-invest tend to underperform, as opposed to those in a blended strategy such as MySuper products.
“Most switches tend to be reactionary and occur at bottoms and tops of markets … The reality is people are going into these style of investments because they feel they have a degree of knowledge we don’t, whether it is true or not,” Lambert said.
Hostplus has also been using a similar strategy, with the aim of experientially educating members about the complexities of making correct investment decisions.
Hostplus’s Choice Plus, which allows members to pick their investments from a range of options, returned -5.1 per cent over the past two years, compared to the balanced option, which returned 19.7 per cent.
Lambert added: “We don’t have a long enough history [with direct investments options] to be going back to members, asking ‘Why don’t you reconsider and go back into one of our strategies?’, but obviously that is something we will look at later.”
“Similarly we think there’s an opportunity for the fund to reapproach members who have gone into self-managed funds to invite them to come back.”