Smaller superannuation funds are likely to benefit more from active management than the biggest funds, according to NGS Super chief executive Anthony Rodwell-Ball.
The challenge for trustees is that many of the smaller fund managers who deliver superior returns will only take small subscriptions, he said.
“If we put $100 million into L1 Capital and a large fund puts the same, and we both get 1 per cent on our $100 million. The impact on our total fund is far greater than it is for those bigger funds,” Rodwell-Ball said.
He noted that AustralianSuper was already indexing half of its Australian equities portfolio for that reason.
“When you’re managing that amount of money you’re probably not getting much better than the index anyway, so why pay active fees?” Rodwell-Ball asked.
NGS Super merged with Cuesuper last year, and the merger with UCSuper will be completed by the end of February – bringing NGS Super’s funds under management to $4.4 billion, said Rodwell-Ball.
However, the projection that NGS Super would reach $6 billion by the end of 2013 is looking unlikely, he said – partly because the fund’s investment return assumptions were in the order of 7 per cent compounding across the fund.
The NGS Super investment committee is set to meet next week, but Rodwell-Ball said there were unlikely to be any major changes, with the fund “staying on track”.
“We remain committed to the long-term belief that equity markets will ultimately recover when Europe gets itself together. There are promising signs coming out of the US, and it looks like the Chinese are managing their economic contraction,” Rodwell-Ball said.
“We currently have a dynamic asset allocation of about 75/25 (growth to defensive) in our diversified option, which is quite bullish. Of course when the markets are pretty flat or negative we do tend to get relatively punished. But in the good times we have excellent results. We need to look at that,” he said.
