A leading equity manager persuaded delegates of the virtue of relatively high equity holdings in superannuation portfolios.

At the start of this session, Justin Wood of Vinva Investment Management asked delegates to consider if members’ investments outside of super should be considered when setting a default investment strategy.

The initial feedback from the audience was that 70 per cent believed these investments should be taken into consideration. The caution of these delegates was highlighted by a slide that showed Australian super funds had a higher allocation to equities than the major retirement funds of Canada, Japan, the Netherlands and the US and the lowest allocation to bonds and cash too.

However, Wood argued against this belief by exploring the issues of asset-liability investment and the relative safety of investments such as property, equity and the Age Pension.

He presented evidence that showed most superannuation retirees are relying on the Age Pension as their main source of income in their first 10 years of retirement. A pension provided by the government, he added, was the income least at risk for a retiree. On this basis, he said an equity exposure of 50 per cent in super implied only a 20-per-cent exposure in the full portfolio of a member’s retirement income.

The session was concluded with a second vote in which many delegates changed their mind on how much external investments should dictate a fund’s investment strategy. This time only 30 per cent believed it should be taken into account.

Day 1 newsletter from CMSF 2013

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