Australia’s biggest pension fund braces for prolonged slowdown
Australia’s largest pension fund sees the global economy struggling for about two more years as businesses and households adjust to tighter monetary and fiscal policies.
Investors have been conditioned to think that market pullbacks are a short-term phenomenon but the current crisis is different, according to Mark Delaney, chief investment officer of the A$260bn ($175bn) pension giant AustralianSuper Pty.
“It takes 12 months to two years for tighter monetary policy to impact on the economy – and monetary policy is just getting tight now,” Delaney said in an interview with Bloomberg in London. “That would tell you that the downturn is coming in 18 months’ time.”
AustralianSuper this month posted its first annual loss since the global financial crisis as rising inflation, geopolitical tensions and fears of an economic slowdown roiled markets.
To help curb the impact, the Melbourne-based institution has been increasing its exposure to government bonds, and pulling back from deploying money in private markets while valuations stabilise.
Delaney said the traditional 60/40 or 70/30 portfolio structure for weighting equities and bonds remains sound, “but you want to have more inflation protection in your portfolio than you’ve run in the last 15 years.”
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