The year 2003 has been a tough one for super funds, dominated by the key themes of increasing regulatory demands and thankfully, an improvement in investment returns. Happily, global equity indices have rallied and emerging markets, Asian markets and technology stocks have bounced back.
Looking ahead, however, it seems that 2004 is also likely to be another difficult year with many changes. If the experts are right, the year should be characterised by unexciting but positive global economic growth and mundane financial returns, punctuated with high market volatility (see p 12). And ways of making money will be different to those in the past.
Institutional investors will have to rethink their asset allocations (see p 27) and their slavish following of benchmarks. They may also be inclined to review how they pay their fund managers. Indeed, performance-based fees are increasingly likely to appear in new mandate contracts.
The mighty clout of institutional investors is also expected to help push corporate Australia into cleaning up its act on the corporate governance side. But institutional investors, it seems, will also have to make sure that their own houses are in order. After all, people in glass houses shouldn’t throw stones.
After rushing to get their Financial Services Reform licence, trustees will turn their attention to the Australian Prudential Regulation Authority’s new licensing regime. Risk management is likely to be on everyone’s minds and many trustees will be sent back to school to boost their superannuation knowledge. They won’t, for example, be able to slack off at next year’s Conference of Major Superannuation Funds as they will be too busy collecting professional development points (see p 22).
Along with the changes in the market, there will be some at Super Review. After almost four years as its editor, I will be moving on to new challenges, with much sadness in my heart. This is because I have made so many friends in this market and have so enjoyed working in an industry where the focus of most is on the betterment of others. I do hope our paths will cross again in the future. In the meantime, I wish all our readers a Merry Christmas and prosperous 2004.
