Aussie super funds to go alternative

Australian superannuation funds are looking to alternative investments as a means of meeting their members' growing return expectations, a report shows.

Over the next three years, the vast majority of Australian funds (86 per cent) expect their appetite for investment risk to grow, according to State Street and the Economist Intelligence Unit's report.

It showed most funds want to move into direct loans, hedge funds and infrastructure to diversify.

Direct loans to third parties proved a popular emerging market, with 69 per cent saying they wanted to increase their exposure between now and 2017.

Meanwhile, 65 per cent wanted to move into hedge funds, 60 per cent into infrastructure and 52 per cent into private equity investments.

"Like funds everywhere, super funds are under pressure to deliver returns to meet members' retirement income expectations in a low interest rate environment,"

Daniel Cheever, head of superannuation sector for State Street in Australia, said,

"To achieve this, they will need to balance the risk reward profile of their growing investments with improvements in data mining, management and reporting."