(Pictured: Tim Poole)
AustralianSuper has been reducing its exposure to government bonds, in favour of corporate loans and shorter-term securities, and increasing its exposure to international listed equities, according to the fund’s annual report published last week.
Following the trend started last year, Australia’s largest super fund has produced a detailed 64-page report, compared with its 12-16 page short-form annual report produced previously.
In his “Investment Update” section of the report, Tim Poole, the chair of the investment committee and an Ai Group nominee trustee, says global growth is expected to show moderate improvement in 2013-2014, which should help share markets.
“The recent volatility provides an opportunity for us to increase our investments in global share markets, particularly developed markets, at lower prices,” Poole says.
“We’re expecting some volatility in emerging markets in the short-to-medium term as the region adjusts to slower economic growth in China. But to put this in perspective, China’s economic growth of around 7.5 per cent will still be more than double that of the rest of the world.”
AustralianSuper has doubled its direct exposure to China as part of its international portfolios during the year to just over 5 per cent.
On bonds, Poole says: “Over the last few years falling interest rates have pushed up fixed interest returns. This is unlikely to continue as economies improve and bond yields rise. We’ve been reducing our investment in government bonds in favour of credit investments (corporate loans) and shorter-term securities.”
The fund produced above-average returns for most of its options in the past 12 months, including the major balanced options. The main balanced option returned 15.63 per cent, against the SuperRatings median return of 14.73 per cent.
As a result, the senior investment staff eligible for the fund’s “investment performance payment plan” received healthy bonuses this year. They received no bonuses under the plan last year. Mark Delaney, the CIO, became the highest-paid executive for the year, receiving a total package of $776,000 compared with Ian Silk, the chief executive, with $611,000. The chief executive is not eligible for the investment performance payment plan.
External investment managers appointed in the past year were: Australian equities – Airlie Funds Management, Avoca Investment Management, Goldman Sachs, and Tribeca Investment Partners; International equities – Lazard emerging markets, UBS Securities, and Westwood Management Corp; Global bonds – AGL Energy, and Hastings yield fund; Private equity – Quay Australian fund; Property – Russell global property fund; Infrastructure – AS Infrastructure, two new IFM funds, and Perth Airport Holdings; and Absolute returns strategies – Q-BLK ARS.
The report shows the results of the recent restructure of senior executives, whereby the direct reports to Ian Silk were reduced from 10 to six effective from August.
The six are: Mark Delaney (investments), Jane Foley (strategy people and performance), Paul Schroder (membership), Shaun Blackmore (service and advice), Tony Cavanagh (corporate services), and the position of marketing and corporate affairs, still vacant after the departure of James Coyle in August.
The fund employed 28 new investment professionals during the year, mostly as a part of its program to insource a significant proportion of its investments over the next three years.
View the full report.