Australia’s best-performing superannuation fund is going against the grain by avoiding cash and bonds, betting the 30-year investment horizon of its youthful members means it can ride out looming economic shocks.
Hostplus, which represents swathes of the country’s baristas and restaurant waiters, had about 53 per cent of its $40 billion invested in the sharemarket, and the remainder in unlisted assets including airports and water-cleaning plants, chief investment officer Sam Sicilia said.
Hostplus beat local peers with a 10 percent return over three years ended Jan. 31, according to Lonsec Group. It’s also top ranked over five years, up 8.9 percent and outpacing the country’s largest pension fund AustralianSuper Pty, the data show. Hostplus has held no cash since at least 2011 and bonds in its portfolios were effectively zero over the past three years, according to Hostplus. The firm prefers stakes in office buildings, pipelines and emerging technology.
Part of that success was due to the fund’s ability to stomach less liquid unlisted assets, Mr Sicilia said.
Risk and Reward
There are a few ways to read this.
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I think the implication of the article is meant to be that the fund that has done the best over the past 5 years did so because it shunned low-risk assets like cash and bonds and loaded up on high-risk assets, and therefore the same strategy will work going forward. Which is why ASIC require everyone to add a disclaimer “Past performance is not an indication of future performance”. You do need to give Hostplus credit for taking a more risk over a period where stock markets performed well relative to other assets. If it were a conscious tactical decision to allocate to more risk assets (I don’t know) then the decision was a good one.
However, the way the article is written seems to imply that Hostplus is simply taking more risk because its members are younger. Which is concerning. The implication would then be:
Hostplus will go up more when markets rise and down more when they fall as Hostplus has structurally higher risk. Suggests the recent outperformance was circumstance rather than good judgement
You don’t want to be in this fund if you are older because they are tailoring the asset allocation for younger members
Are unlisted assets less risky than listed ones?
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Another implication of the article is that unlisted assets are similar to cash and bonds. They aren’t.