Australian super funds will find it much harder to make money in coming years, say investors who manage money directly for, or on behalf of Australia’s $2.9 trillion superannuation industry.
The nation’s sovereign wealth fund last week stated that future returns definitely won’t be as strong as those enjoyed by fund holders in recent years.
Superannuation members have enjoyed close to double-digit investment returns since the end of the global financial crisis a decade ago. But given the global economic uncertainty, the outlook is very different.
Super consultancy firm Rice Warner warned of the likelihood of lower earnings in a report released last week.
“There are indications that global growth … could be negligible for many years. Slow growing and ageing populations, debt mountains, unforeseen trade wars and low inflation provide a paradigm with new rules and metrics,” states the report.
Even Australia’s largest super fund, AustralianSuper, has informed its customers of lower returns now and for the foreseeable future.
But it’s not all doom and gloom for those reliant on the earnings of their super savings. There may be promise of stronger returns should super funds look towards less traditional markets.
That’s the assessment of investors who met last week at the Australian Superannuation Investment (ASI) conference in Hobart.
Less traditional assets will include investing in apartment development and even lending directly to companies.
“We have to look at non-traditional asset classes to achieve those goals going forward,” said Ross Etherington, chief investment officer at EISS Super.
With stocks and bonds becoming less attractive investment options, investors are looking to diversify to hedge against the insecure global economic outlook.
“There will be a lot of pressure on investors to try to chase returns for the next six to 12 months,” said managing director and co-head of multi-asset investing at Lazard Asset Management.
According to investors, apartment developments are a “very stable” asset class, and many say there’s an opportunity to directly lend to Australian companies where returns are above similar deals offshore.
Some still favour domestic equities. According to AMP Capital Investors Ltd senior economist Diana Mousina, stocks “look very attractive” and are ready for a period of outperformance after being beaten by their US peers since the global financial crisis. She also likes the relatively high dividend yields and the favourable tax advantage from franking credits, according to a Bloomberg report.
Are you concerned for the future of your fund? Do you manage your own super? How do you plan to mitigate poor returns?
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