Only the very best fund managers will prosper under the Your Future, Your Super performance test, GQG Partners believes.
GQG Australia and New Zealand managing director, Laird Abernethy, said it would be interesting to see how asset allocation would shift after the performance standards were in place.
“Whether that shifts asset allocation by chief investment officers or whether it stays the same. I suspect it won’t stay the same. If you’re managing to a performance benchmark or explicitly managing to a performance benchmark you’d think behaviors will change,” he said.
“It will make the market tougher for fund managers in terms of only the very best will prosper because you would think that it has the risk of bringing down tracking error in portfolios and running closer to a benchmark than what they may have done.
“There’s also another argument to say they may look to take their risk budget to a particular degree, in terms of having a large core index exposure, and then look to spend up on the risk budget on more high active share, high tracking error to help bring deliver on the alpha proposition.”
However, Abernethy noted that the legislation in its current form was about managing to benchmarks.