The release last week of further research from the productivity commission’s inquiry into the superannuation system, coupled with the evidence provided to the royal commission into the financial sector, has made it abundantly clear that despite all attempts from the government to pretend otherwise, industry super funds continue to outshine the retail sector. Rather than revealing the not-for-profit super funds as being terrible “union run” organisations, both the royal commission and the productivity commission’s inquiry have become de facto government-paid advertisements displaying how the industry funds are better run and better performing.

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The productivity commission’s supplementary papers to the draft report that came out in May was done to provide more detail and an extra year’s worth of data on the performance of funds, which will feed into the final report.

And as with the draft report, this latest research offers bugger-all good news for retail super funds.

The report has found that among MySuper products, 14 out of 16 retail funds underperformed their benchmarks, compared to 7 of the 33 industry funds surveyed:

And importantly, while the underperforming retail funds encompassed the largest of their type, the underperforming industry super funds were among the smallest.

The supplementary paper confirms the draft report findings that if you are in a dud super fund, it is most likely a retail fund, and if you are in a retail fund, it is most likely a dud.

Little wonder, as Gareth Hutchens found recently, people are switching in droves to industry funds.

Since the paper’s release last week there has been some push back from the retail sector – led by the Financial Review, which suggested that “Industry funds not really ‘geniuses’”.

They argue that the productivity commission is too hard on the retail firms and that it lacks understanding of the nature of the industry. The AFR quoted Chris Brycki, a former UBS portfolio manager, who said that industry super funds only performed better because their portfolios contained riskier assets, saying “these guys put themselves on a pedestal as geniuses at picking assets but it’s just because their portfolios are crammed with more risk”.

They also cited Ian Fryer, the head of research for ratings house Chant West, who suggested industry funds had an advantage because they could “invest in these illiquid assets as they have stronger cash flows due to industrial awards and enterprise agreements, and their members are less like to take out their money”. He also suggested that “this means they can invest in long-term assets knowing that they won’t need access to that money for a long time.”

Aside from the fact that those facts alone make industry funds better places to provide long-term returns (the whole point of superannuation funds), the reality is the productivity commission is well aware of this difference in “asset allocation”.

In its draft report it suggested that due to differences in assets the break even annual performance for retail funds was 5.8% compared to 6.6% for industry funds.

And yet even with this lower bar, it found that the average retail fund was unable to clear it.

Instead it found that the average return for retail funds from 2005-2016 was just 4.9%. And while industry funds had a higher benchmark to clear, the commission found that the average return for industry funds was 6.8%.

So even when in effect handicapping the retail funds to give them an easier chance to meet their benchmark, they failed.

In the supplementary report the commission looked closer at why the industry funds out-performed the retails funds.

Clearly fees play a role.

The commission found that on average retail funds charged nearly three times more in fees than the not-for-profit sector:

The commission also found the management costs for different asset types were lower for not-for-profit funds compared to retail funds:

And it also found that across the different assets not-for-profit funds provided better returns at an absolute level (ie not accounting for the proportion of assets held by funds). Although here the commission does sound a note of caution, as retail funds were not particularly forthcoming with data.

It noted for example that “only a handful of retail funds provided data for unlisted property returns”. Thus the suspicion is that these figures (which still show retail funds performing worse than industry funds) suffer from selection bias wherein funds have withheld data that shows them performing badly:

But fees are not the only reason for the better performance. Overall the commission found a 200 basis point gap in the relative outperformance of the not-for-profit and retail segments that could not be explained by fees or different levels of tax paid.

The commission found that had customers over the 13 years from 2005-2013 just passively invested in indexes of equal amounts of shares, cash, bonds and property, they could have expected annual returns of 8.3%, and yet on average they have only achieved 6.4%.

Part of this is due to fees, but a bigger part is due to investment decisions.

The commission found that due to its more conservative asset allocation the benchmark return for retail funds from 2005-2017 was 7.9% compared to the not-for-profit sector of 8.1%, and yet the average net return over that period for retail firms was just 5.1% compared to 7.3% for not-for-profit funds:

The commission noted that the major difference was neither fees nor difference in asset types but a “residual” factor which was “predominantly asset selection” – ie investment decisions. In effect the commission has found that the retail fund managers are just nowhere near as good at their job than their not-for-profit counterparts.

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As with the draft report, which found that a 21-year-old full-time worker with a salary of $50,000 who is in the median underperforming MySuper product would retire with a balance $375,000 lower than if they were in the median top-10 product, the cost of this poor performance revealed in the supplementary paper matter greatly to workers.

The more evidence that is gathered on the super industry, whether in the royal commission or in the productivity commission’s inquiry, the clearer it becomes that retail funds have failed abysmally.

And it is well past time for the government and the bank-friendly media to acknowledge this is the case.

• Greg Jericho is a Guardian Australia columnist