Sunsuper has overhauled its strategic asset allocation while also emboldening its alternative investment program through a series of co-investment deals, SIMON MUMME learns.
David Hartley, the chief investment officer of Sunsuper, says investors for retirement can be placed in one of two categories: those who want to achieve a specific goal with their returns, such as concluding a mortgage or another enduring debt, and those who “want to generate wealth and own as much of the world as they can”.
The $12 billion multi-industry fund’s new strategic asset allocation is designed to satisfy both types. The fund has disbanded its previous five investment choices – from conservative through to aggressive – and accompanying 29 options. Since members “struggled with that much choice,” developing an easier way for them to choose an appropriate option was required, according to Hartley.
So the fund built three “purpose-driven” options for members: long-term wealth-creation, conservative and default. “Members either want wealth-creation, or accumulation to some relatively fixed sum of money.” The wealth-creation option aims to outperform the rate of inflation by 5 per cent in seven-year periods and has a larger weighting to alternatives, while the conservative targets a return of 1 per cent above cash in two-to-five-year periods.
The default product has a bias towards wealth-creation but has a similar risk profile to the median Australian super fund. If members are not satisfied by these options, they can customise their asset allocation, including the respective weightings to asset classes. While an increasing proportion of members have been taking a more active interest in determining which investment strategies they want to govern their super in the last five years, 80 per cent remain invested in the default product, Hartley says.
In addition to restructuring member investment options, the fund has concentrated on its alternatives program in recent months and formed two new co-investment relationships. In April it allied with Peter Cassidy, founder of private equity firm The Sentient Group, which manages the $168 million Global Resources Fund, to bid for a 10 per cent stake in Geodynamics, an Australian geothermal resources developer. In February, Geodynamics finished drilling a 4,200 metre well, Habanero 3, in the Cooper Basin in its quest to extract ‘hot fractured rock geothermal energy’ from the earth.
The company has not yet proved the viability of generating a reliable energy flow from this source, as it must build plant and transmission lines before establishing a commercial power plant. Hence, if their bid is successful, Sunsuper and Sentient would be early backers of the company. “If you can extract that energy, if it works, it will work spectacularly well,” Hartley says. The outcome of the bid was subject to a shareholder vote scheduled to take place shortly after Investment & Technology went to press.