Media Super’s board has given instructions for the super fund to go out and look for opportunities to invest in renewable energy in Australia.
The decision is partly a result of the reduced exposure following IFM’s sale of Pacific Hydro at the end of 2015.
Graeme Russell, chief executive of Media Super, said they would like “to make that back up and even increase it”.
“With a mid-sized fund like ours we would normally be looking at doing that through pooled funds,” said Russell. “We’ve already got some investment in renewables through other pooled funds and we will probably talk to IFM about that, [though] we will talk to other managers as well.”
New infrastructure investment option
This focus on finding renewable energy opportunities coincides with Media Super making an infrastructure investment option available for its members, giving them direct access to unlisted assets.
The Unlisted Infrastructure option became available on October 1, allowing access to portfolios both internationally and in Australia.
Domestically, assets in these portfolios include Melbourne and Brisbane airports, Southern Cross Station and the Eastern Distributor (M1). Internationally, the portfolios have assets such as Vienna Airport, Indiana Toll Road and Anglian Water in the UK.
Media Super is not a direct investor in infrastructure, instead it predominantly invests through IFM, but also through pooled investments.
The return objective of the option is CPI +4.5 per cent over 10 years, with a target mix of 80 per cent in unlisted infrastructure and 20 per cent in cash.
“The key rationale is that our members heading towards retirement, or who are in early retirement, are wanting less volatile returns,” Russell said.
“We know that because we have a stable option which we developed specifically for baby boomer members who are towards the end of their working life, or in retirement.”
While just over 3 per cent of members in the accumulation stage are invested in the stable option, 23 per cent of transition to retirement (TTR) pension funds are in the option as well as 29 per cent of account based pensions.
“So our members are giving a clear indication they would like stability in an environment of low returns,” Russell said.
However, the stable option still has around a 40 per cent exposure to growth assets, so in an environment of significant volatility and low interest rates, the decision was made to carve a standalone infrastructure opportunity out of the balanced option.
Similar to other funds, members can dial up their own recipe of options, and because unlisted infrastructure generally gives lot less volatility, it should give the greatest stability of good returns, Russell said.
“Unlisted infrastructure has been one of the key competitive advantages of industry; it is one of the things that has driven us to outperform retail funds.
“Clearly, members later in life are looking for more stability. We’ve given this option so they can combine it with the property options, they can combine it with the stable option and do what they like.”
The announcement of the option on Media Super’s website came with a heavy plug for members to seek more advice on the option.