David Elia, chief executive of the $115 billion Hostplus, said the Labor government’s return to power is “incredibly positive” for the superannuation sector with the certainties it will bring around preservation.
The rare public display of political support came after the Labor party formed a surprise majority government in last Saturday’s election and nearly obliterated any prospect for the Coalition to enact policies that would make superannuation a more voluntary system in the next few years.
“[It’s] incredibly positive… certainly on behalf of the Hostplus membership of 1.9 odd million people to have a government that is determined to maintain the preservation rules around superannuation,” he told the Milken conference in Los Angeles on Monday.
“It gives us the certainty that we need to continue to deploy for the longer term. Without that, then I would argue a lot of the Australian pension funds would have certainly been challenged by virtue of the current asset allocation strategies that they deploy.
“We’d have high levels of liquidity, more short-termism to manage and obviously drawdown requests. So I think it’s good in that regard.”
Elia said that the Labor government has “clear plans” to work with the private sector on socioeconomic issues like the climate transition and the housing shortage. He also lauded Labor’s plan to make Australia a key critical minerals supplier of the world, which became a prominent geopolitical issue as China, in response to President Donald Trump’s “reciprocal tariff”, placed restriction on exports of rare earth minerals to the US and provided an opportunity for Australia to fill that gap.
Despite some jitteriness from investors around the heightened risks of a US recession and uncertain policy environment, Elia said that the fund will “never bet against” the world’s largest capital economy.
“You can’t bet against a country that has high levels of productivity versus the rest of the world. It is a genuine innovator,” he said, but added that some sectors like technology do look overvalued.
“We’re not getting overly excited, and we’re not overly concerned. We’re continuing to deploy cash.”
The EM question
Volatility in emerging markets – which are heavily dependent on commodities and exports – spiked in April in response to US tariffs, but long-term investors remain positive that thematics like demographics and technology development will bring attractive opportunities in the region.
The past decade has not been kind to emerging markets investors as the promise of higher GDP growth didn’t translate to higher returns. But they have learnt to take a more “granular” approach. Kate Galvin, CEO of Victorian Funds Management Corporation (VFMC), said that while the state sovereign wealth fund broadly reduced its emerging markets equity and debt allocation, it has also started to invest in Indian private credit in the past few years.
“We need to be tactical and really drill down into the specific areas that we’re going to have exposure in,” she said.
“When I talk to my investment team, [they say] my CIO instructs them all that if you’re heading offshore, it’ll be good if you could go via India to increase our understanding of that market.
“It is about what you know, so [we’re] getting out more generally in the region and understanding what’s at play.”
Elia said Hostplus is even more committed to emerging markets right now than in the past. It has 3.5 per cent of its total portfolio allocation to China, which is quite significant for Australian super funds, and is testing the water in frontier markets like Bangladesh and Kazakhstan. He did not specify the type of that exposure but said it would be via high-conviction, active managers whose job is to “go and find the best companies in any country” on behalf of Hostplus.
