Institutional investors using private equity for diversification are just “doubling up on their main bet”, according to Capital Fund Management, and true diversification will only come through strategies that have fallen out of favour in the last decade.
Active managers have been “getting it in the teeth” since the GFC, but that’s about to change as the massive misallocation of capital unwinds. The most valuable companies in the world are trading at a multiple that doesn’t befit their status.
There’s fairly wide disagreement about what private market outperformance will look like in the future, and investors are sweating the amount of money pouring into the asset class. At least the question of valuation is less frenzied than six months ago.
There’s “ammunition for both sides” of the active/passive debate in research that shows just 2.39 per cent of stocks outperform Treasury Bills. But active managers will be buoyed by findings that fundamentals probably do matter.
Investors say they want to build resilient portfolios but all they’re doing is making them robust. And that’s not enough to come back better from a downturn.
Traditional portfolio construction might be dead. But that doesn’t mean there’s no way to beat inflation, even as investors anticipate it will continue to rise and fall over the next decade.
Super fund trustees are throwing their full weight behind nation building projects where they feel their funds can get a competitive return, while the Coalition’s competing super for housing policy has been labelled “elitist”.
The Coalition wants to take the upper hand in the often emotional superannuation wars. Nation building and the new objective of super give it the perfect opportunity.
ASFA’s 2023 conference began with a pessimistic but realistic view of what investors can expect. They either need to build more resilient portfolios, trade more or “nail their colours to the mast and sail”.
Treasurer Jim Chalmers appears to have set himself another impossible task: ending the super wars. But legislating an objective for superannuation and urging funds to take part in nation building projects will only inflame them.