MySuper will represent a move back towards more traditional balanced asset allocation, although the current political climate may lead to the proposal getting hung up on environmental, social and governance (ESG) factors, according to a leading asset consultant.
MySuper won’t lead to a dramatic shift towards index products, said John Coombe, head of consulting — Sydney and executive director of JANA Investment Advisers, at the Association of Superannuation Funds of Australia (ASFA) lunch in Sydney.
“We’re going back to the future, we’re going back to the balanced funds we once had where the trustees took the responsibility for asset allocation [and members were offered] a single default option,” he said.
The focus on reducing costs neglected to take into account that the focus should still be on net return rather than just costs, he said.
“I still think there will be room for active management; I still think there will be room for alternatives within this space because I think trustees will want to differentiate their product to others, and the only way you can differentiate your product is to invest in things that others aren’t,” he said.
With the Greens holding the balance of power, the MySuper proposal was likely to get hung up on ESG factors, Coombe said.
“ESG’s going to be on the agenda big time to get MySuper through. If you’ve got to go through the Senate, you’ve got to get the Greens onside and the Greens onside means governance, sustainability and the environment. To get through the Senate you’re going to have to prove your ESG credentials,” he said.
