Hostplus has restructured its investment team to hire a second deputy chief investment officer as it buys up equities into the market sell-off.
The $50 billion super fund has hired Andrew Howard to work alongside Greg Clerk as deputy CIOs. Both will report to investment chief Sam Sicilia. Howard was CIO at VicSuper before leaving the $25 billion industry fund in December. He has more than 25 years of investment experience including taking on a similar role for Mercer Investments in Asia Pacific and was head of manager research at Frontier Advisors.
Sicilia said the appointment reflected an internal segmentation of investment functions, which had also seen the fund hire Kim Farrant from VicSuper as head of ESG. He added that asset classes were vertical investment functions whereas investment strategy and ESG were horizontal functions that crossed the entire portfolio.
Howard will oversee the “verticals” and Clerk will oversee the “horizontals,” Sicilia said. Meanwhile, the CIO is planning to focus more on geopolitics because the next decade will be very different from the last — “Over the last decade you only had to get two calls right – that interest rates would stay down and equities would benefit from that.”
The investment chief said Hostplus was upping its equities holdings into the market rout because stocks would eventually recover. With interest rates at historic lows, he added that investing in bonds or cash was unwise and would likely lead to long-term wealth destruction. He also said dips, troughs or peaks in the market were not going matter over a long-term horizon.
“The yield on Australian government 10-year bonds is 1 per cent,” he said. “That is equivalent to an earnings multiple of 100 times and yet we complain when the sharemarket is over priced at 30 times,” he said. “Coronavius is what we call an exogenous shock, which means you cannot predict when it’s going to happen and when it does happen you can’t predict how long it will be last before it goes away.”
Sicilia conceded that the supply chain shock would hurt the economy but added that there were plenty of instances where economic conditions were strong and the share market languished. Conversely, there are many instances where the reverse is true.
“Returns from the share market and the impact of an event on the economy are two different things,” he said. “Yes, they interact but it’s a second or higher order effect.”
The investment chief said there has been no 20-year periods where equities underperformed bonds and cash — “all you all have to do is wait it out.”
