A new analysis of superannuation portfolio holdings disclosure data has revealed that Australia’s super funds are well-positioned to face further market volatility.
Researchers at NAB examined disclosure data published by 15 of the largest super funds up to 30 June this year with a focus on MySuper or similar investment products.
The researchers observed high levels of liquidity in the investment options examined, said NAB head of FX investor sales, global markets, Jamie Bonic.
“Given the conditions since March, as central banks seek to curb inflation, the data shows funds have moved pre-emptively to increase liquidity while not deviating materially from their strategic asset allocation (SAA),” he said.
“The research indicates funds remain well-diversified across a range of investment strategies, which should help reduce investment risk and produce more stable returns in the longer term for members.”
Under regulatory changes introduced last year, super funds must now disclose information about the identity, value and weightings of their investments.
NAB said that the analysis covered more than a million individual holdings and represented around 80 per cent of the assets under management for MySuper or similar products.
The average actual asset allocation for growth (68 per cent) and defensive assets (32 per cent) was found to be closely aligned with SAA across the funds examined at 67 per cent and 33 per cent, respectively.
According to Mr Bonic, this likely reflected the growing awareness among super funds of an increasingly uncertain macroeconomic backdrop.
On average, funds were found to be overweight in cash (7 per cent) and equities (56 per cent) and underweight in fixed income (13 per cent) and alternative strategies (2 per cent).
Mr Bonic also noted that funds appeared to be seeking the illiquidity risk premium associated with unlisted assets, with exposures of more than 27 per cent across unlisted equity, infrastructure, property, and alternatives, compared with the APRA SAA of 22 per cent.
“What we are seeing is a barbell strategy in play between overweight cash to counterbalance the holdings in unlisted assets,” he said.
“In managing risk, members can also note that approximately 95 per cent of listed assets are currently invested in developed markets, with only 5 per cent in emerging markets.”
NAB’s research determined that super funds maintain a large exposure to Australian listed assets (46 per cent), above the United States (32 per cent) and Europe (5 per cent).
The bank said that funds were “heavily overweight” in financials at 19 per cent, compared to the MSCI ACWI ex-Australia benchmark allocation of 14 per cent, and were underweight in the energy and tech sectors.
ASFA CEO Martin Fahy said that the analysis showed that Australia’s super system is highly diversified across asset classes and geographies.
“Funds have obviously made extensive use of risk protection mechanisms through the use of derivatives and downside protection and make use of world-class managers with deep subject matter expertise across specific asset classes,” he said.
“Given the global challenges today, this is a timely snapshot providing transparency for the industry, which shows the system is in great shape for members.”
