Research undertaken by NAB and the Association of Superannuation Funds of Australia (ASFA) has revealed that BHP is the number one holding of Australia’s largest super funds.
Expanding on analysis published late last year, in which funds were found to be well-positioned to face further market volatility, NAB took a “deep dive” into the portfolio holdings disclosures (PHD) of 14 unnamed large super funds as of 30 June last year.
The 20 biggest shareholdings of these funds made up 25 per cent of overall holdings of listed shares globally. CSL, Commonwealth Bank, and NAB were found to be the next most popular holdings after BHP. These four stocks alone accounted for 10 per cent of the funds’ holdings.
“International shareholdings are less concentrated, with the top 20 holdings accounting for less than 10 per cent of the total and the top four stocks accounting for only 4.5 per cent of the total (Microsoft, Apple, Amazon, and Alphabet, notwithstanding the overall IT sector underweight),” wrote NAB head of FX strategy Ray Attrill.
As part of regulatory changes introduced in 2021, funds must now disclose information about the identity, value, and weightings of their investments every six months.
Mr Attrill explained that NAB’s study covered more than a million individual holdings across listed, unlisted, and fixed interest assets representing about 80 per cent of the industry’s assets under management for MySuper or similar investment products.
“Against the backdrop of a superannuation industry whose managed savings pool is forecast to double to $6 trillion by 2030, the PHD data provided a timely opportunity to assess the state of play of the industry in relation to current asset allocations, in the knowledge they will almost inevitably change as the size of the savings pool expands during the industry’s current accumulation phase and as contribution rates further increase,” he wrote.
“The study aims to give superannuation fund investment teams, trustees, and ultimately members, greater insights into the breadth of investment strategies, country exposures, and derivatives hedging being used to protect returns in volatile markets.”
NAB observed a 46 to 54 per cent split between domestic and international asset allocation for listed assets — including equities, property, infrastructure, and alternatives — in its study.
This compared to the 53 to 47 per cent domestic/international split seen in the NAB Superannuation 2021 FX Hedging Survey.
“This suggests either that the 14 large funds surveyed have higher international allocations relative to smaller peers or that the trend toward greater internationalisation of portfolios as the growth of funds under management continues to expand faster than domestic GDP, is proceeding apace. We suspect the truth is ‘a bit of both’,” Mr Attrill wrote.
When comparing actual country allocations of listed assets to MSCI ACWI ex Australia equity benchmarks, NAB found that the funds were modestly underweight developed markets (DM) and overweight emerging markets (EM), both by around 1.5 per cent.
Overall portfolio allocation to EM was just 5 per cent, with 95 per cent of portfolios invested in DM, or approximately 10 per cent of overall international exposure when excluding Australia.
NAB also drew attention to some “significant deviations” between the sectors that funds were found to be invested in and the MSCI ACWI ex Australia benchmark.
“Unsurprisingly, given their combined 46 per cent weight in listed Australian equities, funds owned more financials (around 19 per cent ) and materials (12 per cent) than the MSCI ACWI ex Australia benchmark allocations of closer to 15 per cent and 5 per cent respectively,” wrote Mr Attrill.
“The higher allocation to these sectors is primarily at the expense of the (US-centric) IT sector with a 13 per cent allocation against its 20 per cent MSCI ACWI ex Australia weight. Outside IT, lower allocations relative to the MSCI ACWI ex Australia benchmarks are in consumer staples (-1.8 per cent), industrials (- 1.5 per cent vs benchmark) and utilities (-1.3 per cent).”
PHD data up to 31 December 2022 must be published by funds no later than 31 March 2023. NAB indicated that it would further analyse this data during the second quarter in order to help quantify key industry trends.
