State Super has introduced an income sector to their liquid defensive portfolio as a response to the challenges of the low yield investment environment which has particularly affected its ageing membership base.
State Super’s chief executive, John Livanas, said that there was little prospect for any significant turnaround in central bank monetary policy in the short to medium-term which would mean that rates were likely to remain depressed, making it more difficult for fixed interest and cash sectors to achieve real return and defensiveness objectives.
“The prospect of an ageing member base coupled with the pervasive low yield economic and investment environment means that we have to be proactive in building resilience into our defensive asset portfolio,” he added.
“Our new income sector is designed to squarely address this challenge and provide another string to our bow to achieve our objectives for our members.”
The fund said its strategic allocation to the new income sector would vary between its investment strategy options, ranging from 2% in its growth strategy to 18% in its conservative strategy.
The stated objective would be to produce income defensively at cash plus 2% with zero to low duration and high liquidity and, in order to achieve that goal, the fund would have core allocations in Australian investment grade corporate credit and global investment grade structured credit.