Given the size of Australia’s superannuation sector, funds should be seeking more opportunities in global equities, says Cerulli Associates.
Australia’s superannuation sector, as one of the largest in the world with $2.32 trillion under management as of 30 June 2017, will continue to “grow relentlessly”, according to a statement by Boston-based research and consulting firm Cerulli Associates.
“Given their huge size, super funds must necessarily invest more overseas,” the statement said.
“This is partly a function of available assets, and partly due to the fact that Australia does not offer all asset classes.
“For example, its stock market is limited in terms of tech and automotive, and its domestic capital markets do not include a well-developed high-yield space.”
On average, the allocation of either a retail or industry multi-sector super fund as of 30 November 2016 was found to be “30 per cent in global equities, 25.4 per cent in Australian equities, 9.7 per cent in property, 9.2 per cent in domestic bonds, 8.3 per cent in international bonds, and 8.8 per cent in cash”, the statement said, citing Morningstar data.
“If the shift is correct, it probably reflects the end of the commodities boom in Australia, a sense that the good times have come to an end after a 20-year run for Australian banks, movements in the currency, and an improving outlook for global shares, particularly in the United States,” the statement said.
While opportunities could be found from managers “of all asset classes”, “those that are able to provide the best diversification benefits are in a better position”, the statement said, with international managers benefiting most from this uptick in global equities.
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