Legislation could be pushing the super industry towards a passive investment approach while promoting short-termism, according to super funds panelists at the Citi Australian Investment and Asian G10 Rates Conference.
UniSuper chief investment officer John Pearce said MySuper would encourage a more passive approach to asset allocation – the adoption of core and satellite investment strategies by funds was the first step, he said.
Pearce said promoting choice and mobility within the super structure was contrary to superannuation's objectives as a long-term investment vehicle.
"You've got a Government that prides itself on the fact that they've introduced choice and mobility to the system, so our Government has actually encouraged this sort of short-term behaviour," he said.
Retail funds have always had daily switching available for members, which had undermined attempts to promote longer-term performance measures, according to Pearce.
Commonwealth Super chief investment officer Alison Tarditi said the capacity to invest actively in liquid markets reduced with scale. However the active/passive debate also hinged on the fund's internal capability and its perception of 'active management'.
Tarditi said all funds struggled to find the right measure for success, which made it important to know the investment horizon from the outset.
"We are all supposedly long-term investors, but it is difficult at any point in time to work out whether you're completely wrong in your view or whether you just have to wait a little bit longer for validation of your view," she said.
Peter Osborne, head of strategy from VHCM, said active management was a fundamental belief spread across all asset classes. He said his fund had adopted the core/satellite strategy.
Panelists said they were unsure how to resolve the problem of short-termism in the industry.
Pearce said he thought it would always be a problem, as short-termism was inherent in human nature.
"It's a part of human DNA," he said.
