Equity investments are the largest made by superannuation funds, and for good reasons. The equity risk premium, believed to be an ongoing phenomenon in listed markets, suits the needs of accumulation funds and – even better – active management promises to beat this embedded return. Or so we thought. Something has gone wrong in the last decade as markets boomed, crashed and in the end went nowhere. Does this mark the death of the great equity cult? SIMON MUMME and GREG BRIGHT report.
Will Cooper and a dopey Government cost Australia?
The Government’s announcement before Christmas that it would accept the main Cooper Inquiry recommendations and move towards proposed legislation this year has set the scene for an intensification in lobbying by industry groups. The Government has promised further consultations in the process but these will be less formal than in the inquiry process. Meanwhile, funds managers are preparing themselves for an extended period where lower costs will be a key component of their adapting business models. Putting aside the continuing fee-for-service evolution in the retail advice market, the central plank of the costs issue for super funds and their managers is MySuper. MySuper will force all super funds to have a low-cost default option. Both ASFA and AIST have argued against this, but their arguments have primarily focused on the extra administrative burden for funds, and with little-or-no evidence that it would actually benefit members.
Perpetual debuts mortgage trust for instos
Perpetual has debuted what it claims is the country’s first mortgage trust for institutions, and has attracted $175 million to the senior-debt, first-registered mortgage fund with a target return rate of 4 per cent gross return. Despite the recent troubled history of mortgage trusts, Perpetual’s Richard Brandweiner was upbeat about this fund’s chances, and said the fund’s inflows came equally from the fixed-income and alternatives’ allocations of the investing funds. Perpetual had also launched its secured private debt fund No. 2 as a mezzanine-debt second-registered mortgage fund with a target return rate of 10 per cent which closes at the end of next month. In contrast to the older-style mortgage trusts – some of which had daily liquidity – Perpetual’s trusts would be closed-end with three- or four-year timeframes. “The closed-end nature of the fund means that investors commit to lock in their funds for the terms of the loans, meaning that there is no need for daily liquidity,” said Brandweiner, who is Perpetual’s group executive for income and multi-sector investments.
Super funds get up to monkey business
Superannuation fund members need a greater understanding of their basic finances in order to be lead more successful lives, according to Matt Linnert, co-founder of specialist financial education company Innergi. Linnert, who will be speaking this month at the FEAL Fund Executive Forum, believed the more engaged individuals became with their finances the less demand they placed upon governments for financial help – especially when it came to retirement. “One of the cornerstones for a person to be financially successful, at least in the Australian marketplace, is for them to make the most of the superannuation that they hold,” he said.
NGS Super makes foray into China A-Shares
For Tim Hughes, investment counsel at NGS Super, China’s rise is the most important change in the global economy since the industrial revolution – but the challenge for investors is working out how to profit from it. Investing directly in the Chinese A-Share market was one way to meet this challenge, Hughes said, which led NGS Super to appoint HSBC Asset Management and Bernstein Value Equities to invest an undisclosed sum of money in the market for the fund. NGS Super’s time horizon for investing in A-Shares was nothing less than three-to-five years, said Hughes, and the fund would have to accept the volatile nature of the market in the short-term and hope their managers can take advantage of it.
Long shadows loom over the recovery
The phrase ‘double-dip’ hasn’t been prevalent in the business media for at least a couple of months. But the threat of another global, synchronised downturn is still real. Australia’s booming commodities market and solid banks spared us from the worst of the financial crisis, but it was a different story overseas, where stimulus and bail-out packages within recession-hit economies have spawned a new threat.
Hastings brushes off Batsakis departure
Hastings Funds Management has rejected claims that the departure of its head of alternative debt, George Batsakis, cruelled around $400 million of commitments to a junior debt fund it continues to raise. Batsakis left in December 2010 after four years with the Westpac Bank-owned Hastings, a couple of months before a new long-term staff incentive scheme was due to come into force, confirmed Hastings FM chief executive Steve Boulton. In addition to being chief operating officer of the listed Hastings High Yield fund, Batsakis had also lead the global fundraising effort for the Hastings Infrastructure Debt Fund No.3, a Europe-focussed vehicle which was announced a year before his departure.
Invest, but at your own peril
The torrential flooding across eastern Australia in January may rank as the most costly natural disaster to have ever hit Australia, but it will not impact the catastrophe bond universe. As Investment Magazine went to press, the floods had killed 20 people and were expected by authorities to incur up to $5 billion in damage and cut projected economic growth by 1 per cent, or $13 billion, this year. The floods could also become Australia’s most costly insured event, with an expected $4 billion in claims arising from damaged parts of Brisbane and $2 billion from Rockhampton alone, according to AIR International, a specialist catastrophe risk modelling firm. “If accurate, this would rank among Australia’s most costly insured events,” stated Guy Carpenter, a reinsurance broking company.
New ‘guinea pig’ for Superpartners
Cbus will no longer be the ‘guinea pig’ for Superpartners longdelayed administration platform, with Queensland industry fund Aust(Q) becoming the new test bed on the basis it’s a self-confessed ‘simple’ scheme with no member investment choice. Cbus insists the change, which should see Aust(Q) be the first on to Superpartners’ ElectSP system in the first half of 2011, followed by Cbus in 2012, was made at the behest of the administrator. Cbus, which was supposed to be live on ElectSP by July 2009, is one of the five industry fund shareholders of Superpartners which originally tipped $70 million into the system replacement project.
The Big Australian spurs big merger year
BHP Billiton’s tender to consolidate its four separate superannuation funds is a harbinger for a year in which fund mergers will dominate discussion. The resources giant’s efforts to create a single, $3 billion-plus fund for its group will join several mergers already in due diligence or underway, including First State Super and Health Super’s proposed $28 billion union (due June 30), equipsuper and Vision Super’s $9 billion get-together (due 2013), the Brisbane-centric marriage of LGSuper and City Super ($5.5 billion and due June 30) and another Queensland merger in ESI Super and SPEC(Q), a $3.6 billion merger originally due in April but now delayed a few weeks by the flooding in that State.
Let's ride again: MTAA Super re-signs Access
After five years of euphoric performance highs and despondent lows, the $5.7 billion MTAA Super and its asset consultant, Access Capital Advisers, have signed up to do it all over again.
