The regular injection of superannuation money into the Australian stock market has fed a “cult of equities” and produced generations who expect share prices to rise, says John Corr, chief investment officer of Aurora Funds Ltd.

“Constant inflows have held up share prices,” says Corr.  “Retiring Australians cannot rely on the Australian equity market. As inflows cease, share prices could start to underperform.”

As a percentage of total investments Australians have almost 60 per cent in stocks, according to studies cited by Corr. He says there are too many funds managers trying to imitate Warren Buffett.

Corr says superannuation funds know they should diversify their investments and are exploring hedge funds.

Aurora has four funds with daily liquidity calls. Its absolute return fund has generated returns of 9.2 per cent a year since 2005. Aurora’s global income trust fund has risen 8.4 per cent a year since August 2006.

“Some in the hedge fund industry have not delivered and used large leverage,” says Corr. “But we see our skill set in large demand.”