Is your money in one of these ‘fat cat’ funds?

2018’s Top 10 ‘Fat Cat Funds’

I once knew a very rich guy in his sixties who prided himself on ‘calling a spade a spade’.

“You’re fat!” he once said to a bloke we’d just been introduced to.

“Hey!” I said, coming to the poor guy’s defence (while simultaneously sucking in my gut).

“What? It’s the truth! Look at him! He’s a prime candidate for a heart attack!”, he said (while the guy seemed to be having heart palpitations).

“You need to look after yourself. I’m telling you this for your own good”, he said condescendingly to the stranger.

True story.

(And also true that, ironically, he was himself built a bit like Shane Warne ‒ circa 1993.)

Anyway, my wife says that sometimes I behave like him when she wheels me out in social settings ‒ the only difference is that I’m brutal about people’s financial flab.

Case in point: a while back at a BBQ, a guy I didn’t know struck up a conversation with me (the token finance guy) by saying he had his super with what I knew to be a high-fee fund. He wasn’t asking for advice, just making polite conversation on a Sunday afternoon.

“What on earth made you go with them?” I asked, head cocked, eyebrow raised.

But before he could burble out an answer I said: “I mean it’s just a stinker of a fund.”

As I type, I’m literally cringing at reliving this moment.

My wife’s right: no one wants to talk about personal stuff with strangers in a social setting.

But, hey, it’s just you and me sitting here, and we’re old mates … so let’s say we poke a bit of fun at a few flabby funds.

Last week, investment group Stockspot came out with their annual Fat Cat Awards, which ranks the worst-performing super funds.

Stockspot Fattest Funds 2018

Each year the finance industry gives out thousands of awards to itself, but this is one award you do NOT want to win. Here are the Garfields of the game ‒ who’ve been effectively stuck in the cat-flap for the last five years licking the cream off your returns:

  1. OnePath Masterfund ‒ OnePath Tax Effective Income Trust
  2. OnePath Masterfund ‒ OptiMix Moderate Trust
  3. OnePath Masterfund ‒ OptiMix High Growth Trust
  4. OnePath Masterfund ‒ OnePath Balanced Trust
  5. Perpetual WealthFocus Superannuation Fund ‒ Perpetual Diversified Growth
  6. AMP Superannuation Savings Trust ‒ BlackRock Global Allocation
  7. Queensland Independent Education & Care Superannuation Trust ‒ Conservative Growth
  8. Labour Union Co-Operative Retirement Fund ‒ Targeted Return
  9. AMP Superannuation Savings Trust ‒ Future Directions Moderately Conservative
  10. StatePlus Retirement Fund ‒ Balanced

Source: Stockspot

What do all these crazy cats have in common?

They all charge high fees, presumably to pay for all their expert fund managers.

(Oh, and the ‘top four’ are all brothers from another mother.)

Now, if you’re a Barefooter you’ll know I’m a skinny cat who likes index funds (i.e. low-cost funds that mechanically track the stock market, rather than being actively managed).

Guess what Stockspot found?

“Over the past five years we found only 4% of balanced funds beat an index fund. And across all investment categories only 13% of funds beat the indexed option”, adding that this is a global phenomenon in which “actively managed funds have been unable to match low-cost indexed options”.

Faced with this research, they came to a beautifully simple conclusion. They say there are only two things to consider when choosing a super fund: first, find the right type of fund based on your capacity to take risk. (Which Barefoot decodes as “anyone under 40 should go for growth, anyone over 40 should find a bit more balance”.) Second, choose the fund with the lowest fees. (Which is the exactly the recipe I follow in my book.)

So, if you’ve read this far and are thinking to yourself “maybe I’m getting licked”, by all means get in touch with your fund and call a spade a spade.

Tread Your Own Path!