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Engineered equities here to stay
Engineered equities is a paradigm change that will be a 10 to 20 year phenomenon and is no longer thought of as a fad, said Northern Trust.
The asset servicing firm said the interest in engineered equities, or smartbeta, has picked up steam in the last three to four years in Australia and is tied for second with the US interest wise, and Europe taking up the most demand.
Northern Trust's managing director for global equity, Matt Peron, told Super Review the problems the Australian market face surrounds finding the ability to efficiently enhance returns.
"People are taking a step back and looking across the plan and asking 'how can I optimise the mix of strategies?' They're forming a way to move from active management to more factor based strategies, it's a very topical conversation right now," Peron said.
Peron said the Australian market is now entering a new phase of early implementation after moving from education on factor exposure and benefits on implementing systematically either passive or factor exposure.
"Now people are entering the implementation stage so we're starting to see big plans, really make meaningful steps and that has started to take hold in Australia," he said.
"We're seeing two to three per cent of the portfolio being implemented with this strategy and then stage three would be when they really go in and it becomes the dominant part of their portfolio. I believe that will happen in a few years."
Head of Australia and New Zealand Asset Management, Bert Rebelo, said there were also issues around risk budget and the fees being paid.
"It's looking at greater efficiencies and getting more bang for your buck. Ultimately they're doing what they think is best for their members and seeing what is most risk efficient and best performing for fees outcome." Rebelo said.
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AustralianSuper has reported a 9.52 per cent return for its Balanced super option for the 2024-25 financial year, as markets delivered another year of strong performance despite the complex investing environment.
The profit-to-member super fund’s MySuper default option has returned 9.85 per cent for the financial year 2024–25.
Colonial First State (CFS) has announced solid double-digit returns for its MySuper balanced and growth equivalent funds during the financial year.
The super fund’s Future Saver High Growth option delivered an 11.9 per cent return for the financial year 2024–25, on the back of a diversified portfolio and actively managed investment strategy.
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