Super funds still shaping investments to performance test

The degree to which superannuation funds are gauging their investments to ensure they pass the Your Future, Your Super performance test has been confirmed by the latest Manager Intelligence and Market Trends report from global investment consultancy, bfinance.

The report has confirmed superannuation funds’ sensitivity to both fees and equity investments with tight tracking errors.

Bfinance Australia senior director, Fithjof van Zyp said that throughout 2024 the firm had seen a noticeable increase in search activity with strong momentum continuing into the third quarter.

He said this activity had spanned across both public and private markets, with searches ranging from absolute return fixed income, global equities with tight tracking error due to the YFYS performance test, semi-liquid infrastructure for wealth clients and convex or divergent liquid alternatives for downside protection.

“Manager fees remain a key consideration for our super fund clients, with close attention being paid to transaction costs to provide a holistic view of total expenses,” he said.

“Additionally, ESG considerations have become a prominent focus within our search parameters, reflecting the advancement of client SRI policies compared to a few years ago.”

More broadly, the bfinance report said that investors are increasingly looking to improve diversification across regions, styles and market caps amid market concentration.

It said that investor activity in Q3 reflected a continued emphasis on strategic asset allocation, with fixed income, private debt, and infrastructure proving essential in supporting portfolio resilience.