The $1.8 trillion Australian fund management business must embrace innovative investment products if they are to provide investors with adequate returns, says the former head of strategy at the Future Fund.
“I don’t think the industry feels as responsible for returns as it should be,” says Tony Day, who now has his own advisory firm Scarce Capital.
“There are no consequences for funds failing to meet their objectives.”
Over the past decade superannuation and industry funds have not often met a typical investment target of an annual return equal to the rate of inflation plus 5 percent, says Day.
“The whole industry has been set up for the convenience of industry players with benchmarks and tracking errors,” he says, speaking on the sidelines of the Fiduciary Investors Symposium conference organised by Conexus Financial Ltd., publisher of I&T News.
“Funds all follow each other.”
Day says investors should put their money where capital is scarce.
“Investing should be hard work,” he says.
He says Australian funds should support entrepreneurs by investing in venture capital funds.
Instead funds have not changed their asset allocation for two decades: broadly 60 percent stocks and 40 percent bonds, he says.
Day says Schroders, the Future Fund and IOOF are developing innovative investment products.