CEM Benchmarking Report Quantifies the Value of the Your Future Your Super Test

"What is the value of the YFYS test?" shows that the test, applied retroactively to a global pension database, adds 8bps of value.

CEM Benchmarking Report: What is the value of the Your Future, Your Super test? - (COVER) (Graphic: Business Wire)

SYDNEY--()--A new report released today by CEM Benchmarking (CEM), one of the world’s most authoritative pension fund researchers, reveals the effectiveness of the “Your Fund, Your Super” (YFYS) test when applied against a global set of large institutional investors over a nearly 30-year period.

The test, first administered to Australian superannuation funds in 2021 by the Australian Prudential Regulation Authority (APRA), poses an existential threat to any fund that fails the test two years in a row. With the results of the second test coming in only a few months time, this research helps answer questions raised around the tests ability to accurately identify poor-performing funds.

“In the competitive Australian superannuation market, the YFYS test will almost certainly come under attack by those that fail. Our 30 years, 1000+ fund database of global pension assets is uniquely positioned to answer questions of test efficacy, persistence of failure, and features of funds that fail the test” said Dr. Alexander D. Beath, a senior research analyst at CEM and lead author of the study.

CEM found that the test has efficacy, and that over long periods the test preferentially picks out funds that not only performed poorly in the past, but that performed poorly in the future as well, a key feature of good performance test. “Obviously, if you’ve had poor results in the past, the test will pick up on that. More important is the fact that the test picks up on funds that do poorly in the future, which the YFYS test does” added Beath.

Research findings include:

  • Over a 7-year time frame, 14% of investors can be expected to fail the test in any one-year time frame. Over an 8-year time frame, the fraction of investors that can be expected to fail decreases to 12%.
  • Failure is persistent; if you fail the test in a 7-year window, the likelihood of failing the next year in an 8-year window is 77%.
  • The test can help improve system-level outcomes. Removing investors that fail consecutive tests would have improved future net value added across the remaining funds by 0.08% over the past decade (2011-2020), equivalent to an additional A$2.7 billion of additional assets with which to finance pensions.
  • Funds that tend to fail the test more frequently tend to be smaller funds, funds that outsource a greater share of their investment activities, and funds that incur higher investment costs.

The full report can be accessed here.

About CEM Benchmarking (CEM)

CEM Benchmarking is the leading, independent provider of cost and performance benchmarking information for fiduciaries and managers of asset pools: defined benefit, defined contribution, sovereign wealth, and other managed assets worldwide. CEM is deeply committed to helping clients, whether directly or through advisors/consultants, run cost-effective operations that generate value for their stakeholders. With vast industry knowledge and a robust database spanning 30 years and $16 trillion (AUD) in AUM, CEM helps more than half of the world’s top 300 pension schemes understand and manage their costs and performance. CEM also facilitates better pension outcomes by both sharing cutting edge research derived from its proprietary databases and hosting annual conferences.

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Report download: What is the value of the Your Future, Your Super test?


Mike Heale, Principal, mike@cembenchmarking.com, +1 416 369 0468

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CEM Benchmarking Report Quantifies the Value of the Your Future Your Super Test

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Mike Heale, Principal, mike@cembenchmarking.com, +1 416 369 0468