Craig Hurt, chief executive of AXA Investment Managers in Australia, says he is concerned at some of the growth strategies the large Australian superannuation funds are using as they look for growth in a flat investment landscape.
Speaking to I&T News last week – as part of the cover story for the upcoming edition of stablemate Investment Magazine – Hurt was asked to comment on the current investment strategies of the funds.
Are they re-allocating their investments to attempt to find growth and could these strategies backfire if markets turn volatile?
“I’m concerned that because of the competitive nature of the super industry in Australia that some CIOs are trying to show good numbers so they can look better than their competition,” said Hurt.
“Some of them are going into emerging market debt or emerging market equities, and there is a bit of a worry in my mind about that.
“Of course, CIOs are questioning how they enhance returns in an environment of low interest rates, low yields and effectively low returns from equities.”
Two camps
Hurt said that from his observations, super fund CIOs were falling into two camps.
“One camp is looking at their equity portfolios and saying that hasn’t worked over the last four or five years,” said Hurt. “So these guys are after the emerging market assets and high yield.
“The other camp is saying, ‘Wait a minute – my time is about to come. The Aussie dollar has to weaken and [once] corporations have sorted themselves out, earnings should start coming through.’”
Hurt said he felt it was a “surer bet” to anticipate that a weakening Australian dollar and higher equity markets would deliver – rather than
“chasing yield and emerging market debt.”
Stay the course
He said it was often better for managers and CIOs to stay the course with their investment decisions, particularly in an area such as superannuation.
“We, as an investment industry, are incentivised for clients to keep changing their investment strategies,” said Hurt.
“It’s not in our interests to say that the way to make money in the next 10 years is to do nothing different.
“So I have a worry that some of the noise we create as a funds industry is all about the next great investment opportunity, when I always thought that Investment 101 is all about getting the big calls right.”
