Retirement
Super management facing ‘seismic shift in thinking’
Offshore plans to boost returns and diversify investments are in the pipeline for Australian superannuation funds as hedging techniques change, a new bank survey has revealed.
Super management facing ‘seismic shift in thinking’
Offshore plans to boost returns and diversify investments are in the pipeline for Australian superannuation funds as hedging techniques change, a new bank survey has revealed.
The NAB Superannuation FX Survey has discovered that 72 per cent of Australian funds plan to increase their share of offshore investments over the next two years and are considering incorporating unlisted assets such as private debt, infrastructure and real estate.
On average, Australian super funds currently hold around 41 per cent of assets offshore.
NAB’s executive general manager of markets, Drew Bradford, said the survey “is a poignant snap shot of what Australian superannuation fund managers are thinking and how they plan to approach investment strategy and foreign exchange risk in the low interest rate world”.
“The results show that at the same time that funds are increasing their offshore holdings, they are hedging less of their FX exposure to take on more FX risk,” he continued.
He explained that this is because super funds “want to be more responsive to market movements, such as a perceived large undervaluation or overvaluation of the Australian dollar”.
According to the report, the average hedge ratio applied to international equity exposure has fallen to 29 per cent in 2019 from 39 per cent in 2017.
Mr Bradford said that this drop is likely reflective of the downtrend in the Australian dollar, from above 80 US cents at the time of the 2017 survey to nearer 70 US cents in 2019, with expectations that it could fall further.
The results also highlighted how funds are increasingly using target percentages for foreign currency exposure rather than traditional hedging ratios.
For funds targeting a percentage of foreign currency exposure, the average desired exposure is 24 per cent in 2019, based on the MySuper or the default option of the fund.
“The move away from traditional hedging ratios is a seismic shift in thinking,” Mr Bradford said.
“More funds want to view currency risk through the same lens as other asset allocation decisions and feel that running a higher foreign exposure is a cost-effective way to protect against any deterioration in risk sentiment,” the manager noted.
It was reported that the survey examines the hedging techniques of 61 Australian superannuation funds with $1.82 trillion of assets under management, which incorporates around 90 per cent of industry assets under management, excluding SMSFs.
RELATED ARTICLES
About the author
About the author
Superannuation
Expanding super for under-18s could help close the gender super gap, says Rest
In a push to address the gender disparity in superannuation savings, Rest, one of Australia's largest profit-to-member superannuation funds, has called for a significant policy change that would allow ...Read more
Superannuation
Employment Hero pioneers real-time super payments with HeroClear integration
In a significant leap forward for Australia's payroll and superannuation systems, Employment Hero, in collaboration with Zepto and OZEDI, has successfully processed the country's first ...Read more
Superannuation
Rest launches Rest Pay to streamline superannuation payments and boost member outcomes
In a significant move aimed at enhancing compliance with upcoming superannuation regulations, Rest, one of Australia’s largest profit-to-member superannuation funds, has unveiled an innovative ...Read more
Superannuation
Rest appoints experienced governance expert to bolster superannuation fund
Rest, one of Australia's largest profit-to-member superannuation funds, has announced the appointment of Ed Waters as the new Company Secretary. Waters, who brings with him over 15 years of extensive ...Read more
Superannuation
Small businesses brace for cash flow challenges as Payday Super becomes law
With the new Payday Super legislation now enacted, small businesses across Australia are preparing for a significant shift in how they manage superannuation contributions. The law, which mandates a ...Read more
Superannuation
Rest launches Innovate RAP to support fairer super outcomes for First Nations members
In a significant move towards reconciliation and inclusivity, Rest, one of Australia's largest profit-to-member superannuation funds, has unveiled its Innovate Reconciliation Action Plan (RAP)Read more
Superannuation
Payday super legislation promises fairer retirement for part-time and casual workers
In a landmark development for the Australian workforce, the recently passed Payday Super legislation is set to transform the retirement landscape for countless part-time and casual workersRead more
Superannuation
Payday Super passes as Employment Hero, OZEDI and Zepto unite to help small businesses meet new seven-day payment rule
With the Payday Superannuation Bill officially passing through Parliament, Australian businesses are now less than eight months away from a major shift in how superannuation contributions are made — ...Read more
Superannuation
Expanding super for under-18s could help close the gender super gap, says Rest
In a push to address the gender disparity in superannuation savings, Rest, one of Australia's largest profit-to-member superannuation funds, has called for a significant policy change that would allow ...Read more
Superannuation
Employment Hero pioneers real-time super payments with HeroClear integration
In a significant leap forward for Australia's payroll and superannuation systems, Employment Hero, in collaboration with Zepto and OZEDI, has successfully processed the country's first ...Read more
Superannuation
Rest launches Rest Pay to streamline superannuation payments and boost member outcomes
In a significant move aimed at enhancing compliance with upcoming superannuation regulations, Rest, one of Australia’s largest profit-to-member superannuation funds, has unveiled an innovative ...Read more
Superannuation
Rest appoints experienced governance expert to bolster superannuation fund
Rest, one of Australia's largest profit-to-member superannuation funds, has announced the appointment of Ed Waters as the new Company Secretary. Waters, who brings with him over 15 years of extensive ...Read more
Superannuation
Small businesses brace for cash flow challenges as Payday Super becomes law
With the new Payday Super legislation now enacted, small businesses across Australia are preparing for a significant shift in how they manage superannuation contributions. The law, which mandates a ...Read more
Superannuation
Rest launches Innovate RAP to support fairer super outcomes for First Nations members
In a significant move towards reconciliation and inclusivity, Rest, one of Australia's largest profit-to-member superannuation funds, has unveiled its Innovate Reconciliation Action Plan (RAP)Read more
Superannuation
Payday super legislation promises fairer retirement for part-time and casual workers
In a landmark development for the Australian workforce, the recently passed Payday Super legislation is set to transform the retirement landscape for countless part-time and casual workersRead more
Superannuation
Payday Super passes as Employment Hero, OZEDI and Zepto unite to help small businesses meet new seven-day payment rule
With the Payday Superannuation Bill officially passing through Parliament, Australian businesses are now less than eight months away from a major shift in how superannuation contributions are made — ...Read more
