Sunsuper’s shift to alternatives… and another serve at APRA

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by Greg Bright

Sunsuper may well become Australia’s next bellwether fund, perhaps taking over from Aussie Super. Its latest investment strategy and member options to cope with a “lower-for-longer” environment provide a marker for other funds to consider. Regulatory changes have also contributed to this shift.

Sunsuper has closed its international shares option for members and taken up a big allocation to alternatives. This follows last year’s allocation of about $3 billion to smart beta-type strategies. It has now introduced a “Diversified Alternatives” option.

The $42 billion fund believes that global growth will decline by one per cent a year over “the long term”. And the fund appears to be looking at ways to cope with that without reducing member expectations. Good luck.

In a “product update” Sunsuper says that it has lowered its returns expectations over the next 10 years by up to one per cent annually. The reduction cuts across all the fund’s categories and options.

The fund has also made some dramatic shifts within its balanced default option, which makes up about 50 per cent of its money, according to APRA figures. The increases are in private equity, infrastructure and property. Of course, it still invests heavily offshore.

Sunsuper has become a real competitor to Australian Super in the past two years in terms of smaller funds negotiating a merger. Scott Hartley, the marketing-oriented chief executive at Sunsuper, has taken the fund into a new realm nationally since he joined in January 2014.

The latest win for Sunsuper was Kinetic Super. Sunsuper is generally considered to have a better administration service than Aussie Super and now is competing directly with Link Group, the largest specialist administrator for the industry.

As readers of this newsletter know, we do not believe that the regulator-prompted mergers among super funds are necessarily in members’ interests. We would not be surprised to see APRA sued over this issue in coming years. We believe APRA has a myopic and ill-informed view of the industry. We believe this will cost Australian taxpayers dearly in the future. And we are not alone in this view.

Sunsuper has reduced some of its member admin fees, from an average of $4.00 to $3.00 per week. It has eased the pain of the regulatory changes to do with the contribution-cap situation for older members and has passed on savings from technological developments to members.

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