The superannuation and investment industry is overly concerned with peer group risk and surveys and should consider rethinking its approach to how it compiles performance results, according to David Neal, head of consulting at Watson Wyatt.
“One of the other constraints here is our obsession with surveys,” Neal told the 300-plus delegates at the Investment & Technology conference last week. “If we insist on putting surveys together we’ve got to think of a better way of putting them together,” Neal said. Surveys are frequently blamed for the industry’s obsession with short-term performance but are still used by many when choosing managers. Neal said other factors need to be considered when selecting managers. “Everybody thinks they’re a little bit better at picking managers than the next person,” he said. Survey obsession, and concerns about peer group risk, have prevented superannuation funds from allocating significant amounts to alternative assets in the past but in an era of lower returns Neal said super funds need to radically rethink this approach. “People are a little bit obsessed by peer group risk but can the members afford for you not to have taken that risk,” he said.
There is one investment area where Insignia’s $180 billion super arm has not lost money for the past 17 years, which is what it calls the insurance-related investments. The alternatives strategy is gaining popularity among asset owners due to its diversification benefit, but Insignia’s super and asset management investment chief Dan Farmer warns it is a space where investors can suffer if they “stumble in without doing the homework”.
Darcy SongJanuary 23, 2025
