The investment disclosures are a result of legislation passed by the Morrison government in November 2021, which requires funds to publish line-by-line details of their assets every six months.
Default options make up about $890 billion of the $2.3 trillion in assets managed by superannuation funds, with another $870 billion invested in self-managed funds.
The study covers more than 1 million individual holdings, representing 80 per cent of the assets under management for default options.
Big on banks
The analysis shows superannuation funds are overweight the financial sector, which makes up 18 per cent of the portfolio, versus 14 per cent in MSCI’s all-country world ex Australia index.
At the same time, funds are underweight tech assets, investing 13 per cent of members’ money in tech investments compared with 21 per cent in MSCI’s global benchmark.
ASFA chief executive Martin Fahy said superannuation funds had significant home country bias when it came to investing in Australian listed equities.
“I think the home country bias combined with the incentive from franking credits … and the dominance of resources and financial services … is causing them to be underweight on tech,” Dr Fahy said.
“The investible universe of tech stocks within Australia is probably not as close to what you see in the MSCI world generally.”
Dr Fahy said superannuation funds’ tendency to overinvest locally was a reflection of historical factors, including three decades of uninterrupted economic growth before the pandemic, dividend imputation, and the fact their ultimate liability to their members is in Australian dollars.
NAB head of FX investor sales Jamie Bonic said the data showed that funds had moved pre-emptively to increase liquidity as central banks try to curb inflation, while not deviating materially from their strategic asset allocation.
“The research indicates funds remain well-diversified across a range of investment strategies, which should help reduce investment risk and produce more stable returns in the longer term for members,” he said.
The data also reveal the sector’s growing exposure to unlisted assets, which make up 27 per cent of the group’s investments, compared with 22 per cent on the prudential regulator’s benchmark.
The Australian Prudential Regulation Authority has been pushing the super industry to improve the frequency and methodology used in valuing its $650 billion of unlisted assets.
Mr Bonic said funds were also overweight cash, which he said was a way to manage the illiquidity concerns that arise from holding unlisted assets.
He said both superannuation funds and regulators would probably be grateful for the sector’s low exposure to tech stocks, which sold off sharply last year as central banks raised rates to tackle rising inflation.