The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Sunday, April 15, 2012

Mark Bouris Tells Story of Fork-lift Driver vs. Super Fund CEO

Terrific column from Mark Bouris in the Sun Herald today. Excerpt also below:

During the week we saw the curious discrepancy between the views of the chief executive of Australian Super and the outlook for a forklift driver.

The 62-year-old forklift driver from Melbourne had put $80,000 of his savings with Australian Super in its default ''balanced'' option. He couldn't work out why the ads on television were showing industry super funds on the fast escalator when his fund wasn't.

During the past three years the Aussie Super "default" option has returned savers just 1.7 per cent a year, or 3.1 per cent for the past five years.

A good place to start is to understand that Aussie Super's balanced fund is not really balanced. It has half its portfolio allocated to local and global shares, which carry very high risk. It puts another 29 per cent of the portfolio into risky unlisted "private equity" and "direct property".

And it has just 2 per cent invested in cash and 9 per cent in bonds.

It is not hard to work out why the forklift driver is confused and disappointed: if you're over the age of 50, having half your retirement savings in shares puts you in a risk profile that does not suit your needs or life stage...

I'm not saying you should have 100 per cent in cash and bonds. Shares have a very important role to play in most investment portfolios and I am optimistic about the outlook for the Australian sharemarket and for the economy in general.

But getting the right mix of assets is crucial.

If you are over 50 and you're in the default option in your super fund, it's highly likely that no more than 11 per cent of your money is in cash and bonds. Yet the optimal bond allocation for you is certainly far higher. It's as if some super funds have created default options for a 22-year-old - a person who has many years to weather the ups and downs of the market.

There are many Australians who are just like the forklift driver from Melbourne. They are confused and losing faith in the system. So, what can you do?

Read the rest here.