Super funds anxious on generating returns

Generating investment returns is the key issue that is concerning Australia's superannuation funds, along with weathering future economic and/or market shocks affecting returns.

BNP Paribas Securities Services' Investment and Operations Outlook 2016 report found that while generating returns was the second greatest concern last year after regulatory concerns, it had shifted to the top this year, along with apprehensions about the markets and economy.

The survey of asset managers, asset owners, and superannuation funds, among others, came as Super Review geared up for the 2016 Super Fund of the Year Awards.

This year, regulatory change and the risks entailed in that ranked fourth among concerns, with 10 per cent concerned, while seven per cent worried about investment issues. Only one out of the 115 respondents around the country said no issue concerned them.

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The report also found asset owners, managers, and investors wanted greater understanding of how much risk was being taken to generate returns.

"Asset owners and managers who have been pursuing investment returns with very limited risk attribution analysis will have to improve their processes," the report said.

Asset managers were increasingly experiencing issues in understanding and aggregating risks, exposures and performance when they diversified further into other assets such as direct assets.

"This is often due to the fact that some asset classes are more opaque than others (such as infrastructure and private equity), while data can be inconsistent and hard to compare when coming from multiple sources," the report said.

Despite market and economic challenges, the industry predicted offshore equities would generate the best returns for investors this year, with 17 per cent rating global equities positively, while another 12 per cent were favouring emerging market shares.

Local property and global fixed income were least favoured.

"The need to enhance efficiency is still present. However, the previous focus on cutting costs has shifted to adeptness and partnerships to help achieve that," the report said.

Meanwhile, over a third (37 per cent) expected to increase their investment product range, while one in 10 organisations planned to reduce their offerings this year.