Unless you are in one of these three funds, your super withdraws this year

The head of investment at the $82 billion hotel industry fund, Sam Sicilia, said his team’s 2015 decision to dramatically reduce the fund’s exposure to bonds to near zero “paid off big time”.

While he admits Hostplus has the built-in advantage of a young member base (average age 37) and multiple redemptions, allowing it to “play the long game”, he said the rapid returns in interest rates had put some competitors on the wrong foot.

“Anyone who buys bonds for protection is thinking about the financial 101 rather than the interest rate environment,” said Mr Sicilia AFR Weekend.

‘Back, back, back’

Hostplus continues to duplicate unlisted infrastructure assets such as airports, seaports and bridges, said Sam Sicilia. These investments have been criticized for being difficult to sell, having non-transparent valuations and alleged political motivations beyond financial gain.

But the portfolio manager said he would not apologize for exposing members to an asset class that helped them avoid losses across sectors.

“If we do something only for social good, but not for profit, we will not be number one,” he said. “We want returns, returns, returns. Infrastructure assets are usually monopoly. You get paid every time the ship docks, the plane takes off. These are assets that society needs to be civilized.”

He also defended Hostplus’s decision to “maintain full exposure” to the natural resources sector, including shares involved in fossil fuel production, despite criticism from environmental activists.

“Energy stocks go north and we benefit from that, whereas others who have chosen to exclude them from the main fund don’t,” said Sicilia. S&The P/ASX 200 Energy Index is up 19 percent over the past 12 months.

He supports tech billionaire Mike Cannon-Brookes’ major stake in AGL Energy as an example of environmentally conscious investors ignoring calls to divest. “We have socially responsible investment options. If you want to invest [that option] You can do it, but what you can’t do is tell us what to put in the overall fund,” he said. “Engagement with the company is the only way to effect change.”

Qantas Super, which manages about $8.5 billion on behalf of current and former airline employees, also attributes some of its proceeds to energy sector investments, mostly in the US.

“Our members can rest assured that Qantas Super is building a well-diversified portfolio aligned with our competitive advantage in niche, capacity-limited, alpha-oriented opportunities,” said the fund’s chief investment officer, Andrew Spence.

In contrast, large industrial super funds like Cbus and Aware Super have “reduced exposure” to fossil fuels – at least in high-growth or high-growth funds – according to Market Forces activists.

Cbus and Aware saw financial year declines in balance funds by 3.8 percent and 3.7 percent, respectively. However, they are ranked fourth and tenth on the best-performing 10-year chart, with average returns of 9 and 8.5 percent per year.

The nation’s fourth and fifth best performers, Legalsuper and Australian Retirement Trust, lost around 1 percent, while Hesta and Telstra Super reported negative returns of 1.8 percent but still made it into the top 10 for the year.

‘Emphasis on growth’

SuperRatings executive director Kirby Rappell said results suggest that some super funds are not ready for bear market quick returns, having enjoyed some blockbuster returns during their decade-long rise in global stock markets.

“Over the last decade, we’ve seen a lot more emphasis on growth,” Rappell said. “I think we’re seeing a re-emergence of the need for an emphasis on risk protection and downside, as we get more market volatility.”

But he said retirement savers would still have to take “comfort” from the ratings, given the broader market downturn, with the Dow Jones Industrial Average down 16 percent and S.&The P/ASX 200 was down 13 percent.

“For most people, if you look at it over the last year, the ups and downs are pretty muted. Obviously, this stems from an average return of 18 percent the previous year, and some funds return more than 20 percent,” said the analyst.

“People haven’t seen big growth or big losses in their balances, which I think, based on the reflection of the year we’ve had, is probably not a bad result.”

Despite topping the rankings, Hostplus’s Indexed Balanced Fund – which adopts a passive investing style tracks a wider market and is recommended by bestselling author Scott Pape at Barefoot Investor – made a 5.7 percent loss.

#funds #super #withdraws #year