Realignment of the global security order and politicisation of institutions is forcing asset owners to rethink their investment theses for certain countries, while political dysfunction also presents a growing threat to market stability.
Directing super funds to invest in nation-building projects could see money flow from the APRA-regulated system and into SMSFs, according to UniSuper CIO John Pearce, who also suggested that super funds were hitting portfolio limits for unlisted assets.
The total portfolio approach can help investors generate better returns in an “increasingly complex and uncertain environment” by changing the way they think about everything from manager research to dynamic asset allocation, according to the Thinking Ahead Institute.
With the top-performing Meat Industry Employees Superannuation Fund disappearing into CareSuper, Investment Magazine sits down with CIO Chris Artis to discuss the headwinds for small funds, the disappearance of superannuation generalists and the shape of the system to come.
In an environment where many traditional assets are wrestling with geopolitics, trade frictions and AI-driven capex, one asset class has quietly delivered consistent, double-digit returns untethered from interest rate shocks and equity market volatility: catastrophe bonds.
UniSuper CIO John Pearce says the $140 billion super fund remains fully invested through the ongoing correction in equity markets, despite risks stemming from trade wars, massive AI capex and the spectre of rising inflation.
The prudential regulator’s first system-wide stress test found that while super funds are an “important stabiliser” of the financial system, they can also transmit and amplify shocks due to their growing size and links to other institutions.
Australia’s super funds are now operating in a more volatile world. That means they need to be prepared for everything from major liquidity events to hot wars, and understand how their members will behave too.
Super funds need to make it as easy as possible for disengaged members to move into an acceptable – even if not optimal – retirement solution. This raises the question of what “default” might mean in a retirement context, as well as which version the industry may be angling for.
When a member retires, their worldview can shift significantly as they realise they may have to rely on their super fund for income that lasts for the rest of their lives. Members are naturally sceptical of promises and guarantees which is why transparency and trust are critical.
Australia’s sovereign wealth fund says that “resilience” is vital for navigating a world defined by more conflict, more intervention and more inflation. But building it into portfolios is no small task.
With their international asset exposures now sitting at 50 per cent, super funds are looking beyond the US for returns even as they expect the AI and digitalisation thematic to keep powering markets.
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