Unisuper has issued a ‘buyer beware’ warning on the prospects of its high performing Global Environmental Opportunities fund.
The fund has attracted the attention of members after it returned 45 per cent after tax to the end of September for a small group of members who now invest $85 million within it.
It is entirely invested in international companies such as Alfa Laval, Denso Corp, Pentair, Telsa Motors Inc and BorgWarner Inc that have at least 50 per cent of revenues from alternative energy, clean technology, sustainable water, green buildings and pollution prevention.
A combination of stock performance and currency gains on the investment have led to the high returns.
John Pearce, chief investment officer at UniSuper, said the fund has benefitted from a “confluence of favourable positioning on a regional, sectoral, and stock specific basis”.
Close to half of its investments are with European companies that have surged as the Eurozone has caught up on economic recovery taking place in the US and Asia. The fund is benchmarked against the standard MSCI global index return, which was 30.8 per cent in the year to the end of September.
Pearce has issued a straightforward warning to members considering switching into the fund, which was already marketed to members as a ‘high risk’ investment, that past performance is not an indicator of future performance. “It is not unusual to see a pullback in performance after such a strong run”, he said.
He has also given a technical assessment of the fund’s forecast for next year, based on his outlook for European growth.
“We note that the pace of economic expansion there remains sluggish and the outlook for the region is far from certain. In particular we remain concerned about the capital adequacy of the European banking sector and its ability to provide sufficient credit to the private sector in the peripheral economies.”
Adam Gee head of consulting at SuperRatings said he had seen higher returns at a few geared funds that had doubled their exposure to the booming stock market values in the last year, but that the warning from Pearce was a break from the norm.
“It is not unusual to see a fund that performs exceptionally well in any one year not perform so well in the next few years, but it is certainly a different approach to see someone caveating some of the performance,” he said.
The average 12 month return for the Super Ratings 50 international shares index is 27 per cent for the year to the end of September.
