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Super funds won’t get ‘caught out’ on FX

Super funds won’t get ‘caught out’ on FX

Tim Stewart
— 1 minute read

The investment committees of superannuation funds are much better prepared for future volatility in currency markets than they were during 2008 and 2009, says NAB.

Speaking to InvestorDaily at the recent 2015 NAB Superannuation FX Conference in Melbourne, NAB director of currency overlay Emma Lawson said super fund trustees are displaying more flexibility when it comes to currency hedging.

Ms Lawson spoke as NAB launched its 2015 NAB Superannuation Survey, which found that the average FX exposure of funds has increased from 18 per cent in 2013 to 24 per cent in 2015.

“[Super funds] are making dynamic decisions about how much to hedge, both at the asset class level and at the overall fund level,” she said.

“In 2015 they are far more adaptable and flexible to a changing currency environment than they were potentially a number of years ago.”

The NAB survey also found that super fund investment committees are meeting more frequently to discuss hedging strategies, with the number of funds looking at their overall hedging position monthly increasing from 2.0 per cent in 2013 to 25 per cent in 2015.

Seventy per cent of super funds currently outsource their currency management because they see it as a “difficult” asset class, said Ms Lawson.

Rather than advising super funds about whether they should be hedged or unhedged, NAB implements a passive currency overlay for its clients, she said.

Breaking down currency hedging strategies by sector, industry funds have increased their FX exposure to 28 per cent from 18 per cent in 2013, while corporate funds have increased their exposure to 20 per cent from 17 per cent.

The management of currency exposure between fund and asset level held relatively steady with an almost 50:50 split, according to NAB.

Superannuation funds are much better placed to deal with the low Aussie dollar now than they were in 2008 and 2009, said NAB. 

 

Super funds won’t get ‘caught out’ on FX
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