After a year of highs and lows for hospitality and tourism employee fund Hostplus, CIO Sam Sicilia says he is preparing for increasing levels of economic and political uncertainty in 2019.
As Hostplus turned 30 in 2018, its investment in venture capital surpassed $1 billion, making the fund Australia’s largest VC investor. Hostplus also achieved the highest return of all MySuper balanced investment options in the 2017/18 financial year, SuperRatings data shows.
The year also had its challenges, with the Hayne royal commission singling out Hostplus over its retention strategies for members with inactive or low-balance accounts.
On Thursday, ratings agency Chant West data revealed that super fund managed to escape negative territory, but marginally. The median growth fund returned 0.8 per cent, with Qsuper taking the top spot for the year at 2.8 per cent.
In an interview leading up to the Conexus Financial Superannuation Awards in Sydney on February 28, Sicilia said Hostplus took the royal commission as an opportunity to reflect and refocus on how it served its members. The revelations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – which were particularly scathing regarding the retail sector – were a proud reminder of Hostplus’s industry fund heritage, he said.
“It has been pleasing to see Australians voting with their feet and switching to industry super funds,” Sicilia said.
The investment team at Hostplus “do not see 2019 as a year where the world goes back to normal”, he said. “Given the threat of trade wars and high valuations of assets, we are building more defensive characteristics and additional flexibility into our portfolio,” he explained.
He said the fact the federal election would be held some time before the end of the 2018/19 financial year meant more public policy changes were “very likely”.
Regardless of the election outcome, Hostplus planned to approach the government with “innovative proposals to invest in both brown-field and green-field infrastructure assets”, Sicilia said.
Markets could be volatile over the short term but they were often stable and predictable over the long term, Sicilia said, explaining that diversification and long-term investment objectives were best in the end.
He added that diversification was what investors should be focusing on when assessing the risk inherent in their portfolios, rather than risk metrics that promoted “simple notions of what constitutes ‘growth’ or ‘defensive’ assets”.
When asked about incentives paid to executives at listed companies, Sicilia said Hostplus was supportive of companies paying bonuses as long as they were comparable with investment outcomes, had a clear rationale and encouraged behaviour that led to sustainable investment returns over the long term.
“We are certainly supportive of some ASX companies’ move to simplify their incentive structures, set more challenging hurdles focused on the long term, and increase transparency of investment structures,” he said.
The 2019 Conexus Financial Superannuation Awards are sponsored by event partner AIA Australia. All the winners will be announced at a black-tie event on February 28, 2018 at the Ivy Ballroom, Sydney. Tickets now available, visit conexussuperawards.com.au