POWERED BY MOMENTUM MEDIA
Focus on implementation can boost returns: QIC
Superannuation funds should focus on the implementation efficiencies that can be achieved though currency overlays, derivatives and frequent rebalancing, according to big institutional manager QIC.
There is a tendency among superannuation funds to outsource their foreign currency funding to their custodian, according to QIC capital markets managing director Troy Rieck.
"Funds have no visibility over how their custodian is handling that trade. They're also sending a very poor signal, in a governance sense, to the custodian: 'I don't really care how you do this - just do it'," he said.
When a super fund looks to purchase an asset in a foreign country, Rieck said, a good approach is to use a currency overlay manager, who can put a hedging strategy into place at the same time. By using this method, superannuation funds can avoid the custodian's buy/sell spread, as well as the risk of large currency movements, he added.
The selective use of derivatives can also make the operations of superannuation funds more efficient, Rieck said.
"The general superannuation industry suffers from a terrible problem: there's so much money coming in through the door that they don't know what to do with it," he said.
"I don't understand why any superannuation fund in the country would ever be in a position where they'd have to sell equities and trigger capital gains tax if they have positive cashflows of the size they talk about," he added.
The prudent use of derivatives can allow superannuation funds to reduce their exposures to certain sectors without having to sell down the underlying assets, Rieck said.
With current high levels of volatility in markets, superannuation funds can also benefit by frequently rebalancing their portfolios, according to Rieck.
"Frequent rebalancing in a volatile market works really well for funds - it can actually increase returns by as much as 25-30 basis points for a typical balanced fund," Rieck said.
"We're big believers in adding value with certainty. In a fee-pressured world, we think super funds will care a lot more about efficiency questions," he said.
Recommended for you
The rollout of further tariffs in the US from August is expected to decrease economic growth in the US in the longer term, AMP and asset managers warn.
The Australian Retirement Trust is adopting a “healthy level of conservatism” towards the US as the end of the 90-day tariff pause approaches, with “anything possible”.
Uncertainty around tariffs and subdued growth may lead to some short-term constraints in relation to the private credit market, the fund manager has said.
Just three active asset managers are expected to attract net inflows over the coming year, according to Morningstar, with those specialising in fixed income or private markets best positioned to benefit.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom 465 Calder Road Calder
99.46 3 y p.a(%)
2
DomaCom DFS Mortgage
95.46 3 y p.a(%)
3
Global X 21Shares Bitcoin ETF
78.55 3 y p.a(%)
4
BetaShares Crypto Innovators ETF
50.39 3 y p.a(%)
5
Global X GlobalX FANG+ ETF
47.50 3 y p.a(%)
