The Fat Cat Funds Report 2022: how and why we compare super funds

Stockspot’s Fat Cat report compares the worst and best super funds in Australia. We tell you why and how we created our annual compare super guide.

Stockspot’s tenth annual Fat Cat Funds Report has analysed over 500 of the largest superannuation funds investment options in Australia to find the best super funds – and the worst.

Want to find out who the best and worst super funds are for 2022?

On this page you’ll find out:

Why we’ve created the Fat Cat Funds Report

For most Australians, superannuation is their largest personal investment. Yet most people don’t understand this investment, blindly trusting the funds that are managing one of their greatest sources of wealth. Despite our superannuation system being the fourth-largest private pension system in the world, many Australians could retire with a lot less money than they should – or even without the funds they need to support themselves. 

Unfortunately, many fees are hidden and misunderstood, and most super funds’ investment strategies are covered up by jargon and fine print. The Australian superannuation system has funds that are more expensive than many other developed pension systems like Europe and Canada.

That’s why – since 2013 – we’ve researched the superannuation industry thoroughly and we publish the Fat Cat Funds Report to expose the worst performing super funds. We believe in the long-term benefits of investing, so every year we name the funds taking advantage of Australians unwittingly paying away their hard-earned retirement funds in superannuation fees.

By exposing the super industry in this way, we hope to drive change and prompt the offending funds to lower their fees. 

We want you to understand what’s happening to one of your greatest sources of wealth. The Fat Cat Funds Report will help you compare super funds, find funds that have consistently done well and avoid funds with a track record of poor returns.

Most importantly, if you’re not happy, we tell you what your investment options are.

Want to read the full report? Download The Fat Cat Funds Report now.

What is a ‘Fat Cat Fund’? What is a ‘Fit Cat Fund’?

A super fund investment option is classified as a ‘Fit Cat Fund’ if they were in the top ten performing super funds within a particular risk group (such as balanced, growth, etc) over five years. 

A super fund investment option is classified as a ‘Fat Cat Fund’ if they were in the bottom ten performing super funds within a particular risk group (such as balanced, growth, etc) over five years. 

Our methodology

Our super fund ratings system is different from other super ratings in the following ways: 

  • Most ratings businesses are paid by the funds who they rate. This creates a conflict of interest and means they only show the top funds. Stockspot doesn’t get paid by the funds we rate which means we can show the top and bottom performers without any bias. 
  • We compare apples with apples. Many ratings don’t question the asset allocations (growth and defensive assets) reported by the funds. There’s no verification of the actual risk of the defensive assets reported by funds. It allows super funds to ‘game’ the ratings system by mis-categorising growth assets as defensive assets to move up the comparison tables. We classify bonds and cash as defensive assets.
  • We rate funds based on how they have performed after fees over five years compared to funds in the same risk category. Based on this we isolate out two groups of funds: the top performing super funds and worst super funds in Australia in each category.

Stockspot’s Fat Cat Fund ratings are based exclusively on data relating to a fund’s investment mix and published returns.

Our Benchmarks

We’ve analysed Australian superannuation funds across the four largest ‘multi-asset’ categories which include the major default funds and account for most of Australia’s superannuation pool.

  • We only consider funds that have up-to-date data on performance and fees available and have existed for at least five years.
  • Fund performance data is as of 30 June 2022.
  • Funds are categorised using their underlying asset allocation, with the grouping of mixed asset funds based on how much of the fund’s portfolio is invested in defensive assets.
  • We’ve compared funds with similar levels of defensive assets (cash and bonds). We do not use funds’ own classification of defensive assets because these often include property, infrastructure and defensive ‘alternatives’ which we do not consider to be defensive.
High growth 0-20%

Why have we chosen a five year period?

It’s important to see how a fund has performed over a full market cycle (typically 10 years) to have a high level of confidence around how it performs in good and bad times.

Since many of the default MySuper options don’t have 10 years of history yet, we’ve considered performance over five years for this report so more funds could be included. 

It’s worth noting that some of the funds that have performed well over five years have done so due to having a higher allocation to a particular asset, e.g. global shares. 

Past performance doesn’t indicate future performance

Assets go through cycles so just because one asset has done well over the last five years doesn’t mean it will continue to do well over the following five years.

For this reason, we suggest you don’t put too much emphasis on past performance, and instead focus on the two factors that have the best predictive power which are risk (allocation to bonds and cash) and fees.

2022 Fat Cat Fund Key Takeaways

Poor fund performance is largely due to high fees

You’ll be about $245,000 better off over your lifetime if you’re in a fund charging 0.5% than someone paying 1.5%.

Too many Australians are unaware of the devastating impact high fees have on their long-term retirement savings. 

With almost $40 billion in total spent on superannuation fees every year, it is a well-paid gravy train for many who work in the superannuation industry.

Our analysis shows that there is approximately $20 billion sitting in the largest 40 worst-performing Fat Cat Funds, costing Australians over $220 million in fees every year. 

When financial advisers, trustees, executive teams, fund managers and consultants have financial incentives that are not aligned with the people they represent – the fund members pay the price when they retire.

The impact of high fees is more apparent every year as funds find it more and more difficult to generate strong returns to make up for the impact of these high fees. 

The difference in fees between a low performing fund (Fat Cat) and a high performing fund (Fit Cat) is shown below. 

Total Avg1.02%1.44%

Read more about fees in our guide on how to choose the best super fund and compare super options.

Super funds don’t index – exposing you to higher risk and lower returns

A large proportion of superannuation funds don’t index – exposing you to higher risk and lower returns

Investing in an index means buying shares in all of the largest companies, according to their size. For example, the S&P/ASX 300 is an index that tracks the largest 300 stocks on the Australian share market.

Investors can access an index through an index fund or exchange traded fund (ETF) at a very low cost. Because indexed portfolios are low cost, they beat almost all higher cost funds over the long run. 

Investing is one of the few places where the more you pay, the less you get. This notion is supported by academic and empirical research in Australia and overseas.

Superannuation managers can easily access index funds, yet many choose not to. Why? We believe it’s because of the conflicts of interest that still remain in the superannuation industry.

All of the players in the super game have a vested interest to appear to be ‘active’ in making adjustments to their recommendations from year to year. Consultants to superannuation funds want to earn recurring fees, and fund managers need a reason to justify their high six or seven figure salaries.

Generally, assuming funds have the right long-term asset allocation in place, the best course of action is no action – to do nothing and to leave their fund as-is.

Simply investing in the right mix of low-fee index funds would reduce these high fees whilst delivering stronger returns than almost all actively managed super funds over the long run. 

Active super funds constantly claim to be able to protect your money during a downturn. However, during COVID-19 they failed to do so with 60% of super fund options returning a negative number for the 2020 financial year. During the 2022 downturn, 93% of superfunds had a negative financial year performance.

The millions of working Australians in default super funds could benefit greatly if all their super money went into a low-cost index fund.

Download the full report now and compare how your super fund is performing.

What to do if you’re in a Fat Cat Fund

Once you’ve read the Fat Cat Funds Report, you may be worried about your superannuation.

Your options are:

The Stockspot portfolios which are made up of low-cost index ETFs have done better than about 99% of super funds over the last five years after fees and tax, including the largest retail and industry funds.

Investment option returns after investment fees and accumulation super taxes

Average Super Fund-4.3%3.5%5.1%
Stockspot Topaz portfolio-6.1%3.8%6.6%
Vanguard Growth Index-9.3%2.7%5.3%
Average Super Fund-3.8%2.1%3.5%
Stockspot Turquoise portfolio-6.7%2.5%5.1%
Vanguard Balanced Index-9.7%1.1%3.9%
Average Super Fund-3.7%1.3%2.7%
Stockspot Amethyst portfolio-7.1%1.1%4.0%
Vanguard Conservative Index-9.1%-0.1%2.4%

Find out how Stockspot makes it easy to grow your wealth and invest in your future.

  • Chris Brycki

    Founder and CEO

    Chris has been vocal in calling out the industry 'Fat Cats' and is known for telling it as it is. He was an inaugural member of two Advisory Committees for the industry regulator ASIC, and was previously a fund manager at UBS. He holds a Bachelor of Commerce (Co-op Scholarship) from UNSW.

Founder and CEO

Chris has been vocal in calling out the industry 'Fat Cats' and is known for telling it as it is. He was an inaugural member of two Advisory Committees for the industry regulator ASIC, and was previously a fund manager at UBS. He holds a Bachelor of Commerce (Co-op Scholarship) from UNSW.

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