Super funds ‘heavily exposed’ to volatile equities

Former Liberal Party leader John Hewson has questioned the management of superannuation funds and called out Australia’s sovereign wealth fund for ignoring climate risks. Via InvestorDaily.

Speaking on a panel at the Crescent Think Tank in Sydney on Thursday (24 October), Mr Hewson noted that most of the $2.9 trillion of superannuation money is invested in stock markets, primarily in the US and Australia. 

“You are heavily exposed when those markets are as overvalued as they are. By any measure the US stock market is way overvalued. There is going to be a correction. It’s just a matter of when and how far. Super funds are taking a risk by staying in those markets,” the former Liberal Party leader said. 

“Some have rebalanced portfolios and put a bit more into cash, but you don’t earn anything on cash. Fixed-interest gives you a very low return.”

Mr Hewson noted the low interest rate environment globally, highlighting that around 25 per cent of sovereign bonds have negative rates. 

“These are uncharted waters for those in the financial sector. Everyone is chasing yield but the only place you get a return is a stock market. The big question is how sustainable is that return? You can see how volatile equities markets are just based on a tweet from Trump.  This is a very volatile and dangerous world for superannuation funds to be so exposed,” he said. 

Mr Hewson was one of the key figures behind The Climate Institute’s Asset Owners Disclosure Project (AODP), which has since been taken over by ShareAction. Over the years the AODP index and report has repeatedly called out Australia’s sovereign wealth fund, the Future Fund, for lagging behind its international peers on climate change. 

Last week Future Fund CEO David Neal stated that Australia’s sovereign wealth fund does not invest for social concerns and will continue to invest in fossil fuels. 

“Our job is very clear. Our job is to generate a financial return for the nation,” Mr Neal told a committee in Canberra last week. 

Commenting on the Future Fund’s stance, Mr Hewson said: “This is a fund that was buying British American Tobacco flat out when both sides of government were running anti-smoking campaigns.”

“They are not interested in climate risk. The fund is not transparent enough to satisfy a lot of people. They are taking big risks,” he said.

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

One thought on “Super funds ‘heavily exposed’ to volatile equities”

  1. In some respects Mr Hewson is correct.
    Banks, and other investing concerns have way over invested in Australian real estate and Australian banking stock.
    This is a big mistake.
    Mr Hewson is a financial adviser of many years, perhaps an expert.
    However Mr Hewson’s expertise, does not extend to other areas.
    As being involved in welfare state activities, he blindly goes down the ominous track of allowing and exhorting the State, to interfere with folk’s personal liberties, like to smoke or not to smoke and how much etc.
    This is only the purvey of socialist style governments, who will eventually be insisting on controlling most or our activities, all in the name of public good, safety and at huge taxpayer expense, see China.
    In this way, these sorts of government, yes ours too, show contempt for the public’s judgement and moral rectitude.
    This contempt, more or less says, “You are irresponsible, and the State must take over your affairs.” To this I can only say, let’s look at the record of governments.
    Allowing a seemingly caring socialist style government grow, is very dangerous, down the track. Look at the history of socialist governments….national socialism, soviet republics, Cuba, Venezuela, a longer list is available to those who seek out this truth.

    Exactly the same goes for our climate, which has always, but always been, in dynamic flux. A brief look into geology, meteorology and biology, backs this claim.
    Here Mr Hewson, assumes the media outcry is legitimate, and that we are in constant dire climate peril.
    All I can say here is that almost all of the dire predictions have been proven wrong, simply by time and experience.

    Time and experience however do show that economic downturns happens quite regularly and with quite a sobering effect on economies, Australia’s included.
    I rest my case, over to you Australian people.

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