AustralianSuper to boost real estate, infrastructure

AustralianSuperÆs CIO and deputy CEO, Mark Delaney, discusses the fundÆs performance coming out of the credit crunch.
AustralianSuper to boost real estate, infrastructure


The following story appeared in the March 2010 edition of AsianInvestor magazine. Paid subscribers can access this and other magazine stories here. For subscription enquiries, please contact our subscriptions team or call +852 2122 5222.

Mark Delaney was appointed CIO and deputy CEO at AustralianSuper in 2006 upon the merger of two superannuation funds, the Superannuation Trust of Australia and the Australian Retirement Fund. AustralianSuper is one of the largest industry pension schemes in Australia, with over 1.4 million members drawn from over 120,000 workplaces. It manages over A$30 billion ($26.7 billion) of assets.

What was the fund's tactical reaction to the global financial crisis?
We reduced our exposure to listed equities from the second half of 2007 through 2008. That was due to a combination of three things. First, we engaged in two rounds of selling. Second, we didn't allocate new cash flows to equities. And third, we didn't rebalance as the markets fell.

When did you go back to buying equities?
In early April 2009. By then we had accumulated excess cash, and we were ready to liquidate certain strategies. We mainly exited absolute-return products and took a smidgen out of bonds – and a lot out of cash.

When we returned to listed equities, we only bought Australian and emerging-market stocks. All equity markets worldwide looked cheap to us, but it was not clear at that point how or whether the financial crisis would end. As things began to stabilise, we saw inherent value in stocks, but that the Australian and emerging markets were in a far better position. Their banks are stable, they have effective government stimulus packages, and their economies have less exposure to toxic assets.

How much of the portfolio is domestic stocks versus emerging markets or developed markets?
Australian equities make up around 35% of the total portfolio, which is our long-term average. Global equities are 22% of the portfolio, or about 40% of our total equities portfolio. And out of that global exposure, around 40% now is dedicated to emerging markets. Also, our global equity managers have increased their exposure to emerging markets, usually up to 20-25%. So there has been a structural re-weighting toward emerging-market equities in our portfolio.

A year later, how does this shift look?
Our premise that the global economy was stabilising and improving has been validated. It's reflected in stronger markets. The tilt toward Australian and emerging-market equities has been beneficial to us. That said, developed markets have also done well, so our decision has been correct but I wouldn't call it a game-changer.

You are a big investor in long-term alternatives.
That's right. Structurally, we have a large weighting to real estate and infrastructure...

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