Remember when they used to talk about ‘set-and-forget’
retirement investment strategies? Well, the time-honoured 70:30 is looking like
another victim of these ridiculous times. “Take your strategic asset
allocation, tear it up, sit down with a clean sheet of paper and a pencil. And
an eraser.”
That was the advice of Pippa Malmgren, an economic policymaker for
no less than the George W. Bush White House, at a DB Advisors-sponsored Fund
Executives Association luncheon last month.
Remember when they used to talk about ‘set-and-forget’ retirement investment strategies? Well, the time-honoured 70:30 is looking like another victim of these ridiculous times. “Take your strategic asset allocation, tear it up, sit down with a clean sheet of paper and a pencil. And an eraser.”That was the advice of Pippa Malmgren, an economic policymaker for no less than the George W. Bush White House, at a DB Advisors-sponsored Fund Executives Association luncheon last month. An international actuaries report has proposed a new global risk management framework to prevent future financial crises which includes stricter capital requirements for financial institutions with remuneration incentives focused “excessively” on the short term, and the appointment of a country chief risk supervisor. The report, written by the International Actuarial Association (IAA) and titled Dealing with Predictable Irrationality – Actuarial Ideas to Strengthen Global Financial Risk Management, calls for the introduction of counter cyclical regulatory arrangements which require changes in capital requirements when early warnings of bubbles emerge, and wider use of risk management concepts at a micro level.
Private equity fund valuations should fall by almost one fifth by the end of the first quarter, and could fall another 12 per cent in the second, according to research from alternatives boutique Barwon Investment Partners. While major indexes worldwide fell by roughly 40 per cent in 2008, the reporting lags inherent in valuing the net asset values (NAVs) of private equity funds meant the average vehicle declined between 15 and 25 per cent in value in the second half of 2008, and would continue to descend until mid-2009, Barwon wrote in a recent paper, Private equity NAVs: where are they heading?
The $2.6 billion Maritime Super will conduct a full review of its investment portfolios over the next 12 to 18 months on the back of the long-awaited merger of the two maritime industry super funds on March 1. The merger between the $1.5 billion Stevedoring Employees Retirement Fund (SERF) and the $1.1 billion Seafarers Retirement … Read more
The cost of a standard Australian equity trade has risen by more than 10 basis points during the financial crisis, prompting super funds to think carefully about the way in which they rebalance portfolios. According to State Street’s Transaction Cost Analysis, the average equity transaction cost in Australia rose from 25 basis points in 2007 to 38 basis points in 2008. However the cost for a fund of not rebalancing could be even higher, according to Thomas Chevrier, head of research at State Street Associates, Asia-Pacific.
Industry funds should consider charging more for administration and doing so on a percentage-of-assets basis, to help retain nervous members and to survive any future automatic account consolidation regime, according to Mercer executives Russell Mason and David Anderson. Mason is Mercer’s national business leader for multi-employer superannuation, and Anderson the business leader for outsourcing. There are approximately three superannuation accounts for every Australian worker, so funds which rely on a fixed fee per account face a “one-third to two-thirds” reduction in their operating revenue if an automatic account consolidation regime is introduced, according to Anderson.
At a time when investors have become cautious about immediate prospects for private equity, but are bullish on corporate debt, a new asset sub-class seems to be emerging – private debt. Specialists in the field say that assessing companies for debt instruments requires a different set of skills to that of private equity investments. Causeway Asset Management, a private debt manager formed in 2003, is offering a new strategy for Australian institutional investors, which will focus on the SME corporate debt market. Until 2007, Causeway focused on running proprietary portfolios for its joint-venture partners, including a Canadian consortium bank.
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Investment Magazine provides in-depth, monthly analysis of trends and developments for all the businesses in which superannuation funds engage‚ including asset allocation, investment manager selection, custody and fund accounting, member administration, group insurance and compliance.
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