Queensland’s construction industry superannuation fund BUSSQ has failed the Australian Prudential Regulation Authority’s (APRA) annual performance test for default superannuation products, marking the first MySuper fund to do so since 2023. The fund, which is aligned with the Construction, Forestry, Maritime, Mining and Energy Union (CFMEU), reported 10-year returns falling 0.57 percentage points below its benchmark, triggering the fail rating.
BUSSQ’s balanced growth option delivered an average return of 7.04 percent after fees over the past decade, just missing the 0.5 percent threshold below its benchmark necessary to pass the test. Its returns for the 12 months ending June 30 stood at 5.89 percent, significantly trailing the median growth fund return of 9.5 percent. The fund’s heavy allocation to cash and fixed income assets, compared to peers with substantial US share market exposure, was cited as a key factor behind its underperformance.
The fund must now notify members of the fail rating on its default investment option as mandated by APRA. In response, BUSSQ chief executive Damian Wills acknowledged the result with seriousness and outlined steps taken to improve investment outcomes. These include a comprehensive review of the investment strategy completed last year, portfolio changes such as removing underperforming managers, and shifting towards more indexed equity mandates designed to enhance returns.
BUSSQ’s governance structure comprises trade union-appointed directors alongside employer representatives, including chairman Christopher Taylor and directors Emma Eaves, Paul Dunbar, Hemal Patel, Linda Vickers, Paul Hick, Ben Young, and Matthew Rowan.
Despite BUSSQ being the sole MySuper fund to fail, APRA noted that 11 choice superannuation products underperformed, with five failing the test for a second consecutive year. Among these repeat underperformers were two Bendigo Bank funds and three overseen by trustees linked to AMP. These five funds will be prohibited from accepting new members. The six first-time failing funds are required to inform their members and develop strategies either to improve investment performance or transition members to better-performing options.
APRA chairman John Lonsdale highlighted the ongoing importance of the performance test, noting its role in reducing the number of Australians invested in lower-performing products. However, he said persistent pockets of underperformance emphasize the need for trustees to act swiftly in protecting members’ interests. Lonsdale also underscored the importance of controlling administration fees, which can have a meaningful impact on members’ retirement savings.
Introduced five years ago, the annual performance test has been credited with driving funds toward investment strategies aimed at meeting benchmarks and reducing exposure to assets with long investment horizons that can depress short-term returns. The Albanese government announced plans in May to update the test to encourage super funds to invest more broadly and take on higher-risk opportunities to boost retirement outcomes, aligning with broader productivity reforms. According to federal budget documents, these changes aim to remove unintended barriers to investment within Australia’s $4.5 trillion super sector and promote efficient capital allocation to support economic growth and innovation.