Cbus Super chief investment officer Brett Chatfield said the $94 billion fund has built a “small, long” position in Chinese equities, diverging from a generally bearish outlook among its asset owner peers about the world’s second largest economy.
Speaking at a CFA Society Australia conference in Melbourne on Thursday, Chatfield said China is looking “very under-owned”.
“There has been somewhat a softened start based on various press conferences and what expectations people have versus what gets discussed [in recent Chinese stimulus announcements],” he said.
“We are in the camp, at least at this moment, [that] we think that stimulus and discussion around reform there is real and is tangible, and should translate to a better economic outlook for China and also for China asset prices.
“It’s not a huge position, just given the risk position of our overall portfolio, but we do have a small, long position.”
The comments came as the nation’s biggest super fund, the $342 billion AustralianSuper, said this week that it believes the good times for China growth are over.
A big component of the recent stimulus package from the Chinese government was reducing mortgage rates and relaxing down-payment requirements, but AustralianSuper chief investment officer Mark Delaney said at a Bloomberg event in Sydney that the structural oversupply issue persists, which will have “pronounced impact” on the nation.
More broadly, Chatfield said Cbus is overweight emerging markets equites as a result of dynamic asset allocation – the asset class is partially managed internally by the fund’s global equities team.
“[In] emerging markets – across the way we look at things – valuations are clearly much better than the developed markets particularly compared to the US,” he said.
“Policy, obviously supporting the fundamentals, is starting to turn more positive as well.”
Chief investment officer of Australian Retirement Trust Ian Patrick told the CFA conference that private credit is still an attractive asset class to the fund.
“Spreads [in private credit] are not even near as far as they are public credit markets, there’s still attractive spreads out there with good manager due diligence and a capacity to understand how they underwrite, how they work through defaults, etc,” he said.
Speaking on government policies and their impact on superannuation investments, Chatfield said the Coalition’s super-for-housing pitch and other policies that undermine preservation would “in an absolute sense, be very negative for long-term returns”.
“It certainly impacts your ability to invest in unlisted [assets],” he said.
“I think that’s probably the more worrying potential policy direction. We hope ultimately that in a great place like Australia, you shouldn’t have to choose between getting a home and having a dignified retirement. You should be able to have both.”
Meanwhile, Patrick said he is interested to see what a potential early release scenario would do to system-wise stability, noting that APRA intends to conduct a comprehensive stress test, as outlined in its 2024-25 corporate plan. The regulator said it wanted “to understand risk transmission mechanisms between regulated industries and across the financial system”.
“If they execute that system wide stress test fully, [and] they pick up the early release or other preservation type stress and what that could mean for the system, I think we might have some revelation,” Patrick said.