Catholic Super attributes outperformance to asset allocation

Catholic Super added more than 330 basis points from asset allocation alone in the year to June 30, making it the best performer of the year as measured by SuperRatings.

Catholic Super’s annual return of 21 per cent was due in part to an underweighting to fixed income and an overweighting to absolute return funds, which together added 140 basis points. The fund averaged an allocation of 6 per cent to fixed income for the year, compared with the average industry fund of about 15 per cent. The fund has been steadily diversifying over the past year, and its chief investment officer, Tim Hughes, said the fund continued to be worried about the overall levels of risk. “;The best way to manage risk is to diversify,”; he said. In addition to asset allocation, the fund benefited from manager selection which added about 240 bps, with its Australian equities managers particularly performing well. “;In the Australian equities space we got some pretty spectacular returns from managers,”; he said. For the balanced option those managers are: BGI, Cooper Investors, Investors Mutual, Jenkins Investment Management, Maple-Brown Abbott, MIR Investments, Perpetual, Portfolio Partners, and Wallara. Hughes said Catholic Super was also looking for an additional internal investment officer. “;When you look at the manager fees that funds pay, and how much you can actually gain from good asset allocation, portfolio construction and manager selection, I don’t think funds have spent enough on those areas,”; he said. Jeff Bresnahan, managing director of SuperRatings, said asset allocation also played a role in the underperformance of the commercial funds for the year. He said the commercial funds were consistent with the not-for-profit funds all year until May, when their higher allocations to LPTs meant a negative return for the month of June.