Super funds looking in-house on alternatives

Some superannuation funds are choosing to go their own way when it comes to alternative investments, according to the latest hedge fund-specific Opalesque Australia Roundtable.

Credit Suisse Prime Services team leader Dereke Seeto said that a new trend was emerging where “a lot more of the larger institutions are considering rolling out some of their own business lines or units as alternative investment products, as opposed to investing direct into third party external funds or into funds of funds”.

“Investors seem to have a preference for direct investments and are bypassing the funds of funds,” he said. “We see the same dynamics being considered within the super funds, slowly building out teams from their investment committees with the aim of investing direct.”

Seeto told the roundtable that another change was that super funds were also allocating to local hedge funds, which represented a major shift, given that historically most of the allocations from the larger supers have gone offshore.

However, he said the local hedge fund industry still had to deal with the situation that the average Australian hedge fund was relatively small, compared to those being run out of places like the US or some parts in Europe.

“Given the costs now associated with assessing an overall fund, overseas investors tend to not come to Australia if the fund’s size is restrictive or does not correspond to their institutional requirements,” Seeto said.