Surging equity markets have driven the Future Fund’s return higher, but its prediction that inflation will be stickier than expected has been born out and it “remains conscious of the potential for significant deterioration”.
A number of super funds managing less than $10 billion have been slugged with an increase in their restricted APRA levy of more than 80 per cent even as the regulator pushes them to keep costs down.
Impact investing strategy for Australian investors
(Pictured: Richard Brandweiner)
The challenge for big super funds coming to grips with the global trend of ‘impact investing’, such as the NSW Government’s First State Super, is “turning what we see as desirable into probable”, according to that fund’s chief investment officer, Richard Brandweiner.
Brandweiner chaired a session on impact investing at the ASI conference, at which Rosemary Addis, executive director and co-founder of Impact Investing Australia, detailed the progress which had been made around the world and in Australia.
Australia is a party to a taskforce set up last year after UK Prime Minister, David Cameron, held a global conference on impact investing, in which he set the challenge of “using the power of finance to tackle some of the most difficult social issues”.
Australia has set up a national advisory board, which includes both Addis and Brandweiner, and intends to announce its strategy at an event for government, investors, care groups and media in Sydney tomorrow (September 16).
“We are thrilled with the number of people with serious experience and expertise who are stepping forward and want to be a part of this,” Addis said.
Brandweiner told the conference that First State Super was keen to look at the limitations, too, of impact investing and to solve problems and design solutions to get around the limitations.
“It’s like any emerging market,” he said. “It’s a big ‘chicken and egg’ situation. We need to work on the structures of investments. At FSS it’s more about building the scaffolding.”
Part of that scaffolding may be emerging overseas with the early stages of a secondary market for social impact bonds. The NSW Government was the second in the world to launch a social impact bond, whereby it pays a guaranteed rate of return, plus a performance kicker, when certain outcomes are attained on a socially beneficial program, such as reducing recidivism among people convicted of a crime. There are 30 such bonds in the world.
Addis said that insurance giant QBE had taken steps to start a secondary market by buying such bonds around the world.
The global taskforce set up after the UK conference last year has four working groups, looking at: measurement; development investment; asset allocation; and mission alignment.
On asset allocation, Addis said, she believed investors should apply principles of impact investing across all asset classes in their portfolios, but in the short term it would probably be seen as a separate asset class.
