Hairy Maclary and the Fat Cat Funds

I copped an elbow to the head.

“Your turn”, grumbled my sleep-deprived wife.

I stumbled into the nursery, where our daughter was wailing.

Cutting teeth is a tough game, and we’re right in the middle of it.

Still, it allows me to catch up on my 3am iPhone reading. Last night I read the Stockspot Fat Cat Funds Report, which names and shames the worst-performing super funds in Australia.

Now, I may be a little delirious as I type this, but this report reminded me of a book I was reading to our daughter earlier in the evening: Hairy Maclary from Donaldson’s Dairy.

It’s a super-simple set-up: Hairy Maclary and his doggy mates (all with cute rhyming names) are on the hunt for a bone (a high-returning super fund), while at the same time trying to avoid their arch-nemesis Scarface Claw — ‘the toughest tom in town!’ (the Fat Cat super funds).

Scarface Claw is, in this instance, OnePath/ANZ (now IOOF), AMP, Perpetual, MLC and Zurich.

These five financial outfits have 30 of the 40 worst-performing super funds.

What does that mean?

Well, according to Stockspot, the average young worker who has their super with one of these funds could find themselves $200,000 worse off when they retire, compared to choosing a low-cost fund. Hercules Morse, as big as a horse!

Yet, with the greatest of respect to Stockspot, this ain’t groundbreaking research:

This is not a test of investment skill, but of investment costs.

These Fat Cat funds all have one thing in common: they charge way too much (average 2% per annum).

Now, if this was a children’s book, old Scarface Claw would understand the gig was up and scamper away.

Yet this ain’t no fairytale.

The 40 Fat Cat funds have been licking the cream off investors’ returns for years. Collectively, they are siphoning off $150 million a year in fees, according to Stockspot.

In other words, they’re making out like Muffin McLay — like a bundle of hay!

Tread Your Own Path!