Chief investment officer of the $55 billion AMP Super, Anna Shelley, says more super funds will potentially crank up members’ exposure to growth assets as life expectancy increases and people retire later.
Shelley’s prediction came as the retail fund added 2 to 3 per cent growth weightings to all of its MySuper age cohorts and harvested over 11 per cent for around 80 per cent of members over the last year.
The nation’s second-largest fund, Australian Retirement Trust, also recently shifted 1.4 million of its younger members into a MySuper strategy that is equivalent to its high growth investment option.
Shelley says the regulatory focus on retirement has made funds “lift their gaze”.
“Rather than having [the age of] 65 as sort of some endpoint where we hand over the money to members, they buy a caravan and go on some holidays, everyone’s trying to focus far more through to 90, 95 and 100 and make sure that those investments last for the longest duration possible,” she tells Investment Magazine.
Shelley says while funds like Hostplus have always concentrated on the fact that they have a young account base and designed their strategy around that, others have also begun “paying more attention to the nature of their membership”.
Hostplus CIO Sam Sicilia once declared that funds should only consider being more conservative for members “somewhere closer to the actuarial death date”.
But Shelley says it’s hard for funds to have “perfect vision” and decide when to switch to a more defensive investment approach for members, and AMP Super will rely on account statistics to make a call.
Equities shine
Strong returns in the last financial years for AMP’s younger cohorts (MySuper 1970s, 1980s and 1990s) have been driven by global equities, particularly in the US markets, and Shelley says active management has added some good alpha.
“We tend to have a large focus on enhanced quantitative and enhanced active managers [and] they’ve done particularly well over the course of the last year,” she says.
AMP Super implemented an overweight position to global equities in December and is still holding it today. Shelley is bullish on the US market over the next year but says the domestic market looks less attractive.
“[The overweight position] has largely been off the back of what we saw is greater resilience in the US economy than I think many people had expected, and a better trajectory for inflation,” she says.
“We’re less favourable on Australian listed assets…it’s difficult to see the Reserve Bank wanting to lift interest rates, I think politically and socially, that is a very difficult thing for them to do, I think that means they’ll be biased to hold rates.
“And we’re seeing some numbers start to be less rosy in terms of insolvencies.”
AMP Super has been increasing exposure to private debt and diversified credit among unlisted assets. The asset class has been many funds’ favourite since interest rates jumped but Shelly says private credit is “a really broad church”, and picking the right manager is important.
“Domestically, we’ve invested with very conservative, very experienced managers, so we would expect those returns to continue to be strong and that there would be very few, if any defaults within that portfolio,” she says.
“Globally, I would say we’re a bit more core-plus focused – we’re not as conservative as in our Australian portfolio, but we do still pay quite a lot of attention to underlying credit covenants.”
The fund is underweight in real estate and Shelley says it is not planning to increase that allocation anytime soon.
Over the past three years, AMP Super has embarked on a simplification journey as it halved the number of managers and trusts that it invests with. It has also been improving asset allocation processes, including dynamic asset allocation, and Shelley is confident that the “more succinct product fit” will help AMP Super be more competitive.
“Within our super fund, for example, now we have our MySuper suite, an active suite, and a passive suite,” she says.
“Consolidating that down has given us the opportunity…to able to have a fewer number of managers, more effective mandates and to be able to harvest those efficiencies for the benefit of members.”
