A visual analysis of the “APRA — MySuper Heatmap”​ dataset
By: Mark Monfort
Tags: Superannuation, Articles, Finance, Business Intelligence, Data Analytics

When APRA announced it would be making heatmaps and data available to the public it certainly caught the attention of financial pundits as well as everyday Australians who are into this kind of stuff (and it should be way more considering most of us have a vested interest in superannuation). However, this release of data only relates to the MySuper product which was announced in 2011 as part of the Gillard/Labor governement Stronger Super reforms and began being applied by Australian companies in 2014 so the level of details here are limited to 5 years only (LINK). In the months leading up to the release it was clear that some super funds might get worried about how their performance could be portrayed, especially when they might have more conservative investment strategies versus others but when it comes to the benefits that this type of transparency can bring, it’s all the more worthwhile.

Like many eager beavers, I had a look when the data came out and whilst seeing what constituted good and bad performance was of interest, of more importance to me was how much data would be made available and how granular it would be. The release showcased 2 table files, the first with the raw data and the other with some aggregated tables and the heatmap visualisations. With the latter, users could open up Excel and easily filter to see which MySuper products performed best (in this case HOSTPLUS Balanced Option product was best on a 5 year Net Investment Return p.a. basis at 9.65%).

APRA have also colour coded the table to better visualise and showcase performance relative to different metrics such as Admin and Total Fees (more info in the Information Paper).

This is certainly interesting but it is not as interactive as people like me would like. In a view like this its not as easy to group and visualise different cohorts together based on other measures (e.g. like the provided Strategic Growth Asset Allocation figures). Additionally, whilst APRA has done well to provide this info, it would have been even better if they had made more historical time series performance available. Right now the key measures are 3 and 5 year net returns and whilst these are great to begin with, they are as at 30 June 2019. Having historical versons of how these changed on a monthly basis would perhaps be a good first step but in the FAQ’s (shown here: LINK), it states that APRA only intends to publish this data on an annual basis. Seeing the evolution of performance over time should be encouraged as it can prove quite useful when assessing investments.

APRA does state that it will look to some future improvements such as the inclusion of Choice products and investment options to help further understand performance across different sections of the superannuation product set. APRA also list the following areas of Future Development for the heatmap and also welcome feedback on this product so make sure you have your say.

Future Developments (listed by APRA)

review the metrics to ensure appropriate benchmarks and thresholds are being applied to appropriately reflect improvements across the industry;

establish which metrics should be displayed in the concise view to ensure that the key metrics at the time the Heatmap is released are highlighted; and

incorporate additional or alternative metrics and/or products and investment options to reflect subsequent improvements in collected data. For example, APRA expects to incorporate insurance metrics in the next iteration of the Heatmap.

There may also be other flaws and things that those specific to the industry will criticise from here but nevertheless, the data is there and to make it useful for those who want more to more easily visualise the data. As such, I’ve created an online dashboard to gain further insights from this data and I’ve got a link to it so you can try it yourself.

The Dashboard

I used Power BI Desktop from Microsoft to create this analysis mainly because it’s a free tool and because I could publicly share this creation online (you pay when you need to share within an organisation and for enterprise use cases such as requiring authorisation before usage). Qlik is another tool that’s great for use cases like this and in future posts I’ll try to do some work using that tool too (along with others).

Accessing the file

The public link for this is here LINK. Clicking on this takes you to the Dashboard menu. As I’ve made this app public (it uses public data anyway) you can also embed this into your own page via copy/pasting following embed code:

<iframe width=”800" height=”600" src=”https://app.powerbi.com/view?r=eyJrIjoiY2ZhMDg0ZDQtYWM4ZS00ZjE1LWI4MDMtN2Y3OGEwM2QyNGMxIiwidCI6IjI1YTI2MTBjLWVhYzItNDFjZi05OWEwLTM0M2U3MzI1ZDU5MyJ9" frameborder=”0" allowFullScreen=”true”></iframe>

Main Menu

The starting point here is the Main Menu I created. I should caveat that this set of dashboards does not cover all of the analysis that could be done on this dataset. For example, I only chose to analyse the Fees (Admin and Total) as table data for viewing rather than visualise it. This analysis focuses primarily on the Net Investment Returns (NIR).

At this juncture, the user is greeted with the categories of options, Scatter Charts, Bar Charts or Tables. I’ve then split up each type of section into a different viewing options. For example, the first option on the scatter charts is the Net Returns Per Annum on a 3 year vs 5 year basis. The next option is the Net Returns of a $50k balance on a 3 year vs 5 year basis. The last 2 options are the same but vs a simple benchmark and then the SAA benchmark as defined by APRA.

Clicking on the first scatter chart option (Per Annum 3yr vs 5yr) it takes us to the analysis page.

Filters

On the left hand side I’ve included a few filters from which you can hone in on your analysis. I use these to showcase some insights further down in this article.

The first filter is the Strategic Growth Asset Allocation slider. Below that is the Proportion of Total Assets in MySuper slider. Changing either of these will amend what is shown in the charts on the page.

Below this are filters for the RSE (registrable superannuation entity) Licensee, RSE Name and for the particular MySuper product. Some RSE Licensees go by different RSE Names and some only have a single MySuper product whereas others have multiple. You can see this by looking at the Heatmap data file here (LINK).

Going back to Main Menu

Finally, to go to the menu again there is a back button (left facing arrow) at the top right of the dashboard. Click on this to go back to the main menu where you can search for something else.

Chart expansion

Whilst not absolutely neccesary, some users may want to use the chart expansion options in Power BI to view the charts in more detail (depending on your monitor size). This is especially true if we look at the bar charts which can only show the top of the list of results (depending on what you’ve already filtered).

To expand a chart, first you need to hover over it and then click on the Focus Mode button

Clicking this button expands the chart so that it takes up the whole page and it can showcase more detail.

To go back to the original view you just need to click on the ‘Back to Report’ link at the top left hand side of the page.

Insights

In this section I highlight a few interesting findings from looking at this data. Whilst it is limited in its volume, there are still some things worth noting. Before I go on, I need to caveat that what’s being shown here by APRA is not investment advice and that past performance is not an indicator of future returns (pretty sure APRA mention this too it’s here but just in case you missed it).

Insight 1 — Risk = Reward (well, duh!)

The AFR highlighted Hostplus a week and a half ago because their ‘Balanced’ super fund was shown to be heavily weighted to riskier growth style assets (a link to the article is here- LINK). In this case it was 93% allocated to growth assets. Hostplus countered that this is misleading due to assumptions made on APRA’s part with ‘non applicable’ categories being counted as listed but there is some fault on Hostplus side too as you can see from the article.

Regardless, the dashboard I created allows you to visually see performance of Net Investment Returns (in this case the raw per annum returns not against any benchmark) for 3 and 5 year performances.

Hovering over the most upper right dot, I can see a pop-up that shows it belongs to Hostplus and that it has the 93% strategic allocation to growth assets and has $45 billion in Net Assets ($45M on screen is in 000's).

Clicking on this dot now highlights just Hostplus and the metrics on the top right hand side now showcase just the 3 year and 5 year returns for Hostplus on a NIR p.a. basis only (10.8% and 9.65% respectively).

Clicking on the Hostplus dot again now unselects it and we can see that whilst Hostplus 9.65% dominated the 5 year returns, the overall average across MySuper products was 7.29% over the same time period (not too shabby).

Also, because this is interactive, I can filter to see what risky/higher strategic growth asset allocation would have returned across the MySuper products. In my app I use the filter for the strategic growth asset allocation to adjust the bottom limit to 50% and we can see that 5 year returns jump to 7.93% p.a.

If you were to take a less risky path, 5 year returns fall to 5.07% p.a.

Despite whatever labelling a product might have, this goes to show that if you want good returns you do need to take a higher level of risk, at least in this most recent history of investment returns data and only for these MySuper products. Were APRA able to include the non-MySuper (i.e. member choice products) then comparisons of performance between these cohorts could yield even more interesting results.

Insight 2 — The higher the proportion of Assets and the higher allocation to riskier growth = More Reward (but only to a point)

For this analysis I jump to the scatter chart for the Net Returns on an average $50k superannuation balance (2nd option on the main menu). Like the analysis above, I slide the strategic growth asset allocation filter to 50% and above. I can see that the 3 year returns are 8.66% p.a. at this level on average for the MySuper products that fit this profile.

Now we’ll take a look at changing the proportion of total assets in MySuper as well. This is the 2nd slider on the left hand side.

Does more proportion of assets in a riskier asset allocation bucket mean that there is more reward? As we can see below, sliding the proportion to 50% and above shows an increase to 8.84% p.a. for MySuper products that fit this profile.

Again, increasing the slider to 60% and above for the proportion component shows a modest increase in returns to 8.87% p.a. for these products.

However, here’s where more assets invested in MySuper does not provide more returns. Increasing the slider to 70% and above shows diminishing returns. At 70% and above the average returns across the MySuper products drops slightly to 8.85% p.a.

And finally, at 80% and above on the proportion of total assets slider we see a further dwindling of available MySuper products but also, a pullback again in the 3 year returns.

There is a point at which the returns that clients are rewarded with increases not only with riskier asset allocation across MySuper products but also allocating more of one’s total assets to those MySuper products. But, at a certain point this diminishes, at least for 3-year Net Returns relating to the average $50k super balance.

Whether or not these return profiles are similar across other returns data is something that you can explore, especially now that I’ve provided the link to this app.

CONCLUSION

Tables and even heatmaps are great at providing some level of further insight about data and its a great first step from APRA with what they’ve showcased from these MySuper products. I hope there will be more of this data made available so that others like me can use the wealth of analytics tools on the market to make interpreting these financial results so much easier.

If you have questions on the APRA data, there’s more details available in the Data Insights paper they released (LINK) as well as through the Information Paper (LINK).

If you have any questions on Power BI or analytics in general then shoot me a message here and I’d be happy to point you in the right direction.

Note: This article was originally published by me on LinkedIn on December 30, 2019.