Prime Super, the $1.2 billion superannuation fund for those living in rural areas, says it wants to invest more than a third of its fund in so-called alternate investments, while also holding preliminary discussions with potential merger partners.

Prime Super wants to have as much as 37.5 per cent of its fund in property, infrastructure, private equity and credit instruments managed by Access Capital Advisers, up from about 30 per cent at present, says Lachlan Baird, the fund’s chief executive.

“As long as there is a broad pool of investments the returns should be there,” says Baird. “No one investment can bring down the fund.”

Baird says Prime Super’s membership profile – 140,000 members whose average age is 31 years – allows a greater proportion of the fund compared to others to be invested in alternate assets. The fund’s members have no pressing need to liquidate their fund for perhaps another three decades.

Access Capital’s portfolio of investments that have been Australian dollar hedged have had annual returns of 10 per cent since 1997 compared with the MSCI World ex-Australia return, Australian dollar hedged, of 6.3 per cent.

About 70 per cent of Prime Super’s investments are in Australian stocks and bonds, international shares and cash.

Prime Super’s default investment option has had an annual return of 0.8 per cent over the past five years. Its managed growth option has had annual returns of minus 2.5 per cent during the same period.

Baird says most superannuation funds are thinking about mergers, Prime Super included.

“We are speaking to other parties but it’s very early exploration days,” says Baird. “We’ve got to be able to add value.”

Prime Super has signed a five-year contract with Russell, who will manage the fund’s administration services to its members. Pillar Administration lost its contract with Prime Super.

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