Super funds should not give up in their search for a mutually acceptable definition of defensive and growth assets, urges Paul Caskey, chief investment officer of the South Australia injury insurance scheme ReturntoWork.
Caskey, who uses the performance tables of super funds to help benchmark his $3 billion fund, has stepped into a debate that has seen a wide range of views.
PwC kicked off the debate with a paper pointing out the discrepancies in how super funds classify defensive assets in the SuperRatings SR Balanced (60-76) survey. Sam Sicilia, chief investment officer of HOSTPLUS, responded by calling for the modernisation of how we classify defensive assets, so that they include parts of investments, such as infrastructure, with bond like characteristics. While Brad Holzberger, chief investment officer of QSuper, wants to see the industry move away from performance tables and to use individual measures of adequacy for members.
Caskey said the industry needs to show more leadership at a time when it is currently being questioned for its ethics.
“It disappoints me to see comments like ‘moving beyond the debate’ because the league tables are so widely used,” he said. “It makes it really difficult for the consumer.”
His concerns is that the more growth assets a fund can define as defensive then the better its returns will be.
“It is the average punter that is going to get burnt by this, not realising that one fund is being true to holding defensive assets and there is another fund being not as defensive as they thought,” he said.
He cited his experience before a parliamentary inquiry into how an investment strategy works for the need for clarity.
To this end, he has proposed that the industry move to a three tier system that would factor in an assets likely outcome in a market crash.
In this, cash and securities rated AA or above would be classified as low risk, while core property, infrastructure and investment grade credit would be medium risk. Finally, equities would be classified as high risk assets.