A big chunk of super funds are now in “limp mode” as their buffer against the performance test evaporates. And sustainable investing is getting harder when even tobacco exclusions eat up the tracking error budget.
Performance concerns for sustainable investing have risen to the fore as the Your Future Your Super (YFYS) test shortens investment horizons. The wider return outlook is more challenged too.
“In general, it is a healthy environment for hedge funds, with allocation from institutional investors expected to rise. As markets brace for uncertainty, investors expect hedge funds to offer positive returns while reducing portfolio risk.”
The performance test as it stands isn’t “fit for purpose” when it comes to choice products. And its bright line nature means tweaks are needed for MySuper products too.
The regulator says it doesn’t “blindly adopt” a big is good, small is bad approach, and is concerned the industry is consolidating too quickly.
While Australia’s biggest asset owners are “extremely sophisticated” on ESG, the shackles of the idiosyncratic Your Future Your Super (YFYS) benchmarks are still holding them back on portfolio decarbonisation.