Female-led MySuper funds outperforming industry benchmarks

At a time when every little bit of investment return really counts, there is one sure-fire answer that might come as a surprise – Girl Power.

While that might have been the mantra famously promoted by the Spice Girls way back in 1996, it is also a real-life way to boost your returns.

Research by Rainmaker Information has shown convincingly that the performance of female-led MySuper products outperformed by an average of around 0.3% a year over three, five and 10 years.

To come to the conclusion Rainmaker looked at the performance of 18 women-led MySuper products, all of which had women in senior positions with investment influence such as the chair, chief executive officer, chief investment officer, or where the majority of trustees are women.

This was no small group and represented $450 billion in funds under management.

Larger returns likely with female leaders

Using data to June 2022, the research found that over three years the funds outperformed by 0.25 percentage points, by 0.31 percentage points over five years, and by 0.27 percentage points over 10 years.

That is a significant amount and represents about a quarter of the average annual fee, so it is well worth having.

Research manager Pooja Antil said the analysis “shows that funds with a stronger women leadership outperform the industry-wide benchmarks over multiple time periods.

“The outperformance is not massive, but it’s consistent and large enough to have a long-run impact,” she said.

Small increases add up over time

What seems like a small amount of outperformance really adds up over time.

Assuming a base average return of 5%, modelling of the 0.3 percentage point outperformance for a member from age 25 through to 67 sees $43,000 added to their super balance, or about 7% more. If the base average return is 6%, the result almost doubles to $76,000.

Looking at the composition of the equity holdings, the women led super funds held a slightly more concentrated Australian share portfolios, as at June 2022.

“The proportion in the portfolio held in their top 50 active equity stocks was 78% for the women-led products vs 71% for the other MySuper products (men-led products),” Rainmaker said.

“This same slightly higher concentration tilt was also evident for their international share portfolios. The proportion in the international equity portfolio held in their top 50 stocks was 31% for the women-led products vs 27% for the other MySuper products.”

There were some differences in the list of most favoured local stocks with BHP (ASX: BHP), CSL (ASX: CSL), Commonwealth Bank (ASX: CBA) and NAB (ASX: NAB) appearing on both lists but Transurban Group (ASX: TCL) was on the list for the women-led funds, while the extra favourite for the male-led companies was Macquarie (ASX: MQG).

By sector, women and men favoured materials, banks, energy, pharmaceuticals and diversified financials. However, women-led funds were structurally much more exposed to the transport, banking, food and diversified financials, according to Rainmaker, while male-led funds were more exposed to healthcare, materials, professional services, energy and media.

In international equities, the women-led funds were a little more exposed to the US technology stocks while the male-led funds had a higher proportion of Asian technology companies.

Diversity pays off

“With more than three decades behind us since superannuation was introduced, while women leaders still haven’t been able to make it a 50:50 ratio in leadership roles, they are narrowing the gap. But that we even focus on it is a big hint in itself as to why it matters,” Ms Antil said.

“The logic is simple, to be able to think diversely and recognise a broader range of investment opportunities, there must be diversity in boards of trustees and top management of super funds. Gender diversity is not the only manifestation of diversity, but it’s a crucial one.”

Unfortunately, the gender super gap continues

Hopefully female investors are taking advantage of the greater returns offered by women-led MySuper funds because there has been little progress made in closing the superannuation gender gap.

By the time Australians turn 50, the average gap between a man’s and a woman’s superannuation balance has widened to a staggering 24% or more than $100,000.

That makes it even wider than the gender pay gap which the Workplace Gender Equality Agency calculates to be 13.3%.

The reason for many is that women take more time out of the workforce to do unpaid caring, with those breaks interrupting the power of compound interest.

Older women more prone to homelessness

One of the many symptoms of the superannuation gender gap is that older women are Australia’s fastest-growing homeless population with one in six women over 55 classified as being without a home.

While men are still predominantly the group experiencing homelessness, Mission Australia said the number of women becoming vulnerable to homelessness is increasing.

Causes include domestic violence, relationship breakdown, financial difficulty and limited superannuation.

“Older women are the fastest growing group of people who are homeless, often due to low retirement savings, superannuation and lack of home ownership, leaving them at the mercy of the soaring costs of living and totally unaffordable rental market across the country,” Mission Australia executive of practice, evidence and impact Marion Bennett said.