BT... Bin Truck Super?
One piece of housekeeping, all of the information in this guide is factual information sourced from publicly available information. This article is not personal advice, it does not provide any recommendations and does not take your specific needs or circumstances into consideration. You should consider your own financial position, objectives and requirements and seek financial advice before making any financial decisions.
Let's begin with a riddle, what starts with the letters B and T, it’s noisy, slow, stinks, is full of trash and if you're unlucky, might damage your second biggest asset outside of the family home if you parked it in the street?
No, it's not the Bin Truck, it's BT Super, specifically, BT Super MySuper.
You may have read in the news this week, regarding the "Your Future, Your Super Performance Test", specifically the funds that failed the test and extra specifically, the funds that have failed the test for the second year (it's only been around for two years).
Now two things, first of all, think of the APRA Performance Test like your Learners Drivers Licence Test, passing it doesn't make you any good, it just means you're allowed to try. Failing it makes you really, really, bad.
Secondly, what this blog post tries to do, is answer the simple question, if BT Super MySuper is so diabolically bad, what are they invested in and who is managing the money? Which it turns out, is difficult to answer.
Let’s start at the beginning.
What's MySuper? MySuper is a fund that means you can provide super to people who have no engagement, think when you join an employer and don't pay attention to what fund or what investments or what insurance you go into. MySuper tries to ensure you don't get ravaged by fees, insurance or poor funds. It's a good thing,
Who's APRA? The Australian Prudential Regulation Authority (APRA) is the super funds cop.
What's the Your Future, Your Super Performance Test? APRA has a benchmark, they grade how MySuper products against what they expect is a reasonable return, if you fall below this on an 8-year time horizon if you fail it twice, there are big consequences.
Now there are four separate funds that fall into this bucket. This bucket contains the funds who have failed the test twice. So you might say, the bucket being the container and the contents of the bucket are, according to Australian Prudential Regulation Authority (APRA), shit.
Four funds have failed the test for the second year in a row, they include:
There are three other funds aside from BT, which I will speak to at the bottom of this post. Today, BT is our main focus.
I'd say BT Super could refer to Bintang, but the only difference is that Bintang would leave a sweet taste in your mouth.
Ok, so who is BT Super? Good question, BT Super is one of the brands of superannuation products owned by Westpac.
It's worth noting that Westpac owns more than just BT Super, they also own Asgard (which failed the test last year, one of and is being closed down) and then also owns Westpac Group Plan MySuper which manages its own employees, which failed the test this year. One of 5 funds to fail the test this year.
So, Westpac operates 20% of the total funds that failed the test for FY22, and 100% of its MySuper products have failed the test at least once, which has only been running for two years.
BT Super is big and BT Super is in big trouble with the regulator for its poor performance. BT Super has charged its members a fortune in fees, and it's provided one of the worst outcomes for its members, which let’s emphasise, it's the member’s money, it's their money.
They've failed a test, twice in a row, that 93% of their peers managed to pass.
To do such a bad job they have to write to their clients a letter where they are legally required to urge them to leave the fund. Because they've failed two consecutive tests, they are banned from taking new members.
BT Super's MySuper products include 7 different names, all of which are called Lifestage. There's Lifestage 1940s, Lifestage 1950s, etc up to Lifestage 2000s, essentially, they're designed to give you an appropriate investment based on your age.
Why does this matter? Great question, because, according to the SMH, as at 30 June 2021, there were 476,242 members in BT Super's Lifestage products. That’s bigger than the population of Canberra (395,790), bigger than Newcastle (322,278), bigger than the entire ACT, and the entire Northern Territory. BT Super MySuper Lifestage members are the 7th biggest city in Australia, and that’s if you include the Gold Coast as a city….
Source: Google & Sydney Morning Herald
So why does it matter that BT has so diabolically underperformed for the last 8 years? Well, in the same 8 years that they've been delivering atrocious returns for their members, they've paid Westpac $221 million of dividends, and that's only since 2016.
At the same time, and based on the respective funds Portfolio Holdings Disclosures as at 31 December 2021, and assuming the total fees on a $50,000 account per the APRA Heatmap, again as at 31 December 2021, BT would charge an annual fee of $278,563,877 per annum.
That's $5,356,998 per month, $765,285 per day, or $31,887 per hour, to be one of the 5 funds that have failed the test twice.
So the question is, what makes BT so bad? And the answer is presumably a confluence of factors. It’s not necessarily fees, but rather the chief reason for them failing the test is their comparatively terrible returns. And that would imply, their investments are terrible.
So, Andy, what exactly are BT Super MySuper Lifestage products invested in? A fine question, and a reasonable one, and as it turns out, one that is very tricky to answer indeed.
It takes a lot of reading annual reports, to finally figure out, that the BT Super MySuper Lifestage Funds (1940s through to 200s) are sub-invested in two funds:
BT Multi-manager Accumulator Fund
BT Multi-manager Protector Fund
Source: Page 1 and Page 13 of BT Super for Life and BT Super Annual Report for the year ended 30 June 2019
For the younger end of town, e.g. the 2000s LifeStage, we've got around (as of 30 June 2019) 96.63% in the BT Wholesale Multi-manager Accumulator Fund and 3.37% in the BT Wholesale Multi-manager Protector Fund. Because they're younger, have a longer time to invest, more growth, makes sense. Then for the 1940s, it's the opposite, the majority in the more conservative BT Wholesale Multi-manager Protector Fund, because they're older, less ability to tolerate volatility, again, makes sense.
Now it makes sense, it also apparently barely makes a cent, because these funds are the entirety of the investments that have performed so abysmally.
So precisely what the fudge is the Accumulator Fund and Protector Fund invested in!?!?!
Well, here we go down the rabbit hole. Because these funds, which are funds within funds, themselves are made up of other funds made of other funds, it becomes extraordinarily difficult to work out who is managing the bloody things.
So far I've managed to figure out the following, based on the annual reports.
Both the BT Multi-manager Accumulator Fund and the BT Multi-manager Protector Fund are disclosed as being related parties holding the following interests in the following BT funds, as at the 30 June 2021 reports:
Advance Cash Multi-Blend Fund, has a 41.10% interest held by the 'Accumulator Fund' and an 18.89% by the 'Protector Fund'.
Advance Property Securities Multi-Blend Fund 50.90% interest held by the 'Accumulator Fund'.
BT Property Securities Index Fund has a 49.26% interest held by 'Accumulator Fund'.
Advance International Fixed Interest Multi-Blend Fund has a 24.51% interest held by the 'Accumulator Fund' and a 28.20% interest held by the 'Protector Fund'.
Now let’s remember, Westpac formerly owned BT Funds Management, and continues to own Advance (more on it later), so after hours trawling the back pages of google and dusty old financial reports, we can say, that at least some of BT's super, is managed by entities either wholly, partially or formerly owned by Westpac, and that these managers have delivered returns that are so poor, so bad, so below their peers, that the regulator has banned them from letting new people join their fund.
Source: Productivity Commission, Superannuation: Assessing Efficiency and Competitiveness, 2018
Funds are now required to be more forthright with disclosing their positions. Thanks to the Portfolio Holdings Disclosure for the reporting period as at 31 December 2021 whilst we can't see the managers who are running the money, we can see what they invest in, which brings an amusing light to fact:
Across the 7 respective Lifestage Funds, and using the data current as at 31 December, we can deduce, that the funds in aggregate held 12,940,859 shares of Westpac. This had a value of circa $276,287,346.
Now let’s be fair, using one fund at random, according to Superratings, the BT Super - MySuper 1970s Lifestage Fund, has 34% invested in Australian Shares. Then, WBC is for example, 3.56512% of the ASX300, per Vanguard VAS, which means that 1.21% of the portfolio should be invested for the 1970s product and circa 0.85% for the 1960s product.
Well, on a balance as at 31 Dec 2021 of $8,251,134,141.69 for the 1970s Lifestage Fund and a WBC holding of $101,720,934.06, that means that 1.23% of total funds was invested in WBC, which is slightly above the market weighting. Alas, perhaps a small contributor to their shoddy performance.
So you could argue, looking at the Superratings Asset Allocations ranging from Australian Shares allocations of 15% right up to 34%, that BT Lifestage Funds hold $4,929,609.96 more in Westpac stock than the average market weighting, using Vanguard VAS ETF and Portfolio Holdings as at 31 December 2021. Is that egregious given it's 0.02% of FUM, no, but it's funny.
BT and its parent company Westpac have not delivered for members. It's depressing to learn that whilst 4 funds failed for the second year, Westpac's other superfund, Westpac Group Plan MySuper, which manages circa $3.6 billion for its own employees’ retirement savings, also failed the test for 2022.
Source: Productivity Commission, Superannuation: Assessing Efficiency and Competitiveness, 2018
BT has been so severely rebuked in this, that they are legally obliged to write to their clients encouraging them to seek out other funds. They are banned from accepting new members.
If your local restaurant was forced by the Health Department to stop allowing new customers, would you continue to eat there?
Westpac has been trying to sell its BT Super operations for a while, recently it's announced it will be sold to Mercer, another for-profit manager.
Included in the sale is Westpac's asset management business, Advance, which judging by the fact both of their funds comprise the 7% that failed the performance test, is not one with a desirable track record. Apparently, BT Super, which includes Australia's 7th largest city of BT Super MySuper Lifestage members, will give Westpac a loss of $80 million, but when considering the Advance business, resulting in an after-tax gain of $225 million in total.
So it's good to know, that whilst members of Lifestage products pay approximately $278,563,877 every year (based on APRA fees on a $50,000 account as of Dec 31 2021 and Portfolio Holdings Disclosures as of 31 December 2021) to Westpac, they'll be traded like cattle for a loss for Westpac shareholders.
This is the same bank that was lambasted in the royal commission, embroiled in a scandal involving rates, fined for charging fees to dead customers and finally had their CEO resign over a money laundering scandal allegations the bank failed to stop transactions with the Philippines involving child exploitation.
This is yet another example of how conflicted interests deliver rubbish outcomes for members, for Australians, of which, we are talking about their money, not Westpac's.
Retail funds are more likely to choose an "associated provider" e.g. if you're with a bank, they will choose their own Australian equities fund, instead of the best possible one, which, is good for bank shareholders, bad for members. Historically this has been sold by their army of financial advisers salesmen.
Now, let's just point out some of the other funds on the list:
The Australian Catholic Superannuation and Retirement Fund is not a great fund. According to SuperRatings, it has 85,622 members and a fund size of $1.51B. It's small change compared to BT, it's also merging with UniSuper, which hasn't failed the test.
It has been well-publicised that the Energy Industries Superannuation Scheme-Pool A, known as EISS, is a very bad fund.
It is supposed to merge with CBUS, which hasn't failed the performance test.
The one thing I'd end on is being able to say that BT Super is most certainly not the Bin Truck Super, as we sadly can see, the performance of Australia's largest listed Garbologist Cleanaway's share price has far exceeded the investment performance of BT, whatever it is they invest in, if it were bin trucks, we'd not be in this situation...
Source: Google
Hopefully one day we can figure out what makes up the investments of this fund,
Andy
One piece of housekeeping, all of the information on the site is general information and general advice. This means it does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.
Independent Wealth Advice Pty Ltd is a Corporate Authorised Representative (Number 1289358) and is authorised through Independent Advice Group, AFSL 543780.
Andrew Darroch is an Authorised Representative (Number 1252820) of Independent Advice Group, AFSL 543780.
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