The one certainty about  superannuation over the next 20  years is that it will grow. It’s the  miracle of compound interest plus  a legislated minimum of the flow of  foregone wages every week.  The structure of the industry,  either through evolution or new  regulation, is a little more difficult  to predict. There will be fewer  but larger funds, perhaps even  more SMSFs [when will they stop  growing in number?] and perhaps  fewer managers.  The influence of sponsoring  organisations, such as unions and  employer bodies, may wane – with  or without possible legislative  change to the make-up of trustee  boards – with the sheer size of  funds and continued push for  professionalism and best practice.

For most super funds and other Australian institutional investors their experience with the ownership of infrastructure assets has, by and large, been a happy one. Not the same can be said for all such investors. Each of the eastern States has at least one disastrous toll road experience for investors and many retail investors in listed infrastructure funds were taught a painful lesson by the GFC.

According to Mike Fitzpatrick, a veteran of the asset class, much of the recent criticism of infrastructure – and certainly that part assigned to the investment banks which packaged and promoted many funds – is justifiable. He predicts that the days when investment banks fed transactions by outbidding each other to win tenders and then structuring the investments into funds, often with long-term management contracts in place, are hopefully over.

in the one field that refuses to rationalise

Interest rates are not the only thing going up in Australia in defiance of the rest of the world. While the transition management marketplaces of London and New York have seen a number of investment banks exit, or at least ‘transition transition’ into their custody or asset management affiliates, in Australia the broker-dealers are standing strong, and in 2009 have even been joined by new competitors claiming ‘purer’ models.

Yet this abundance creates a problem for the chief investment officer wanting to move from Manager A to B. At least a dozen competitors are marketing seriously in Australia, and putting as many different spins on their service while doing so. These spins range from broker-dealer to pure agency multi-broker, asset manager, liquidity arranger, or project manager/consultant. So, a CIO could spend as long determining the right transition manager as they did deciding to transition in the first place.

MICHAEL BAILEY gets some guidance from consultants, and asks the transition managers (TMs) themselves, about how best to differentiate and negotiate in the transition management milieu.

Dynamic asset allocation, enhanced asset allocation, strategic overlay, stractical investing: call it what you like, there’s a new kid on the block and it’s occupying the minds of super funds, asset consultants and funds managers alike. With super funds beginning to value downside protection more than incremental return, asset consultants and multi-managers have seized the opportunity by offering a service that moves away from “set-and-forget” strategic asset allocation (SAA) by taking intentional tilts over a medium term time horizon. KRISTEN PAECH reports on the investment phenomenon that has given consultants a new lease of life.

Many super funds had to write out big cheques last year. They needed to cover their currency hedging positions over international assets as the Aussie dollar tumbled from near parity with the US to around 60c at its low point. As a result, and notwithstanding a subsequent recovery in the $A, future defensive strategies are being explored.

National Australia Bank recently held a one-day conference for super funds and managers to debate various aspects of the currency dilemma.

GREG BRIGHT reports.

Insto investors question active management

Never before, or at least never in living memory, have super funds faced such uncertainty as in the past 12 months. But with signs of recovery emerging for both markets and the global economy, trustee boards are feeling that it is safe to get back into the water. Most have been sitting on cashflow build-ups and have recovered a good part of their Aussie dollar hedging losses from last year.

The big question now is: what to invest in? If you believe in the recovery and mean reversion then this could be the best beta play of all time. On the other hand, active managers claim the markets represent a stockpicker’s paradise. The old active versus passive debate has returned with a vengeance. SIMON MUMME and GREG BRIGHT report.