Evaluation of Australian industry superannuation fund performance; asset allocation to property

2016 ◽  
Vol 34 (4) ◽  
pp. 301-320 ◽  
Author(s):  
Wejendra Reddy
Keyword(s):  
Asset Allocation ◽  
Dynamic Models ◽  
Performance Measure ◽  
Theory And Practice ◽  
Portfolio Optimisation ◽  
Investment Strategies ◽  
Fixed Income ◽  
Content Type ◽  
Strategic Approach ◽  
Asset Class

Purpose – Property is a key investment asset class that offers considerable benefits in a mixed-asset portfolio. Previous studies have concluded that property allocation should be within the 10-30 per cent range. However, there seems to be wide variation in theory and practice. Historical Australian superannuation data shows that the level of allocation to property asset class in institutional portfolios has remained constant in recent decades, restricted at 10 per cent or lower. This is seen by many in the property profession as a subjective measure and needs further investigation. The purpose of this paper is to compare the performance of the AU$431 billion industry superannuation funds’ strategic balanced portfolio against ten different passive and active investment strategies. Design/methodology/approach – The analysis used 20 years (1995-2015) of quarterly data covering seven benchmark asset classes, namely: Australian equities, international equities, Australian fixed income, international fixed income, property, cash and alternatives. The 11 different asset allocation models are constructed within the modern portfolio theory framework utilising Australian ten-year bonds as the risk free rate. The Sharpe ratio is used as the key risk-adjusted return performance measure. Findings – The ten different asset allocation models perform as well as the industry fund strategic approach. The empirical results show that there is scope to increase the property allocation level from its current 10-23 per cent. Upon excluding unconstrained strategies, the recommended allocation to property for industry funds is 19 per cent (12 per cent direct and 7 per cent listed). This high allocation is backed by improved risk-adjusted return performance. Research limitations/implications – The constrained optimal, tactical and dynamic models are limited to asset weight, no short selling and turnover parameters. Other institutional constraints that can be added to the portfolio optimisation problem include transaction costs, taxation, liquidity and tracking error constraints. Practical implications – The 11 different asset allocation models developed to evaluate the property allocation component in industry superannuation funds portfolio will attract fund managers to explore alternative strategies (passive and active) where risk-adjusted returns can be improved, compared to the common strategic approach with increased allocation to property assets. Originality/value – The research presents a unique perspective of investigating the optimal allocation to property assets within the context of active investment strategies, such as tactical and dynamic models, whereas previous studies have focused mainly on passive investment strategies. The investigation of these models effectively contributes to the transfer of broader finance and investment market theories and practice to the property discipline.

Market dip highlights US equities as a key risk

2018 ◽  
Keyword(s):  
Emerging Markets ◽  
Corporate Bonds ◽  
Global Markets ◽  
Fixed Income ◽  
Government Bonds ◽  
Content Type ◽  
Bear Market ◽  
Asset Class ◽  
Negative Factors

Significance Global markets are being unsettled by a confluence of negative factors, especially a sell-off in government bonds that has raised the yield on 10-year US Treasuries by 10 basis points to 3.16%, 35 basis points higher than in August. The fierce moves in fixed income are reviving fears about a full-blown bear market in bonds. Impacts Widening policy divergence will boost the dollar; 10-year US Treasury yields are rising faster than their German and Japanese equivalents. Pressure will persist on fragile emerging markets (EMs) and the entire asset class; investors have sold EM equity and bonds in October. Spreads on dollar-denominated EM corporate bonds fell this month, defying worries about high EM corporate debts, but fears will persist.

Landmark buildings and diversification opportunities in the residential market

2016 ◽  
Vol 9 (4) ◽  
pp. 429-445 ◽  
Author(s):  
Lucia Gibilaro ◽  
Gianluca Mattarocci
Keyword(s):  
Asset Allocation ◽  
Time Horizon ◽  
Efficient Frontier ◽  
Diversification Strategy ◽  
Content Type ◽  
Risk Return ◽  
Good Investment ◽  
Asset Class ◽  
Housing Investments

Purpose This article aims to analyze the performance and risk of landmark building in the housing sector and to evaluate their usefulness for a diversification strategy. Design/methodology/approach After comparing summary statistics on the performance of landmark building with respect to other types of housing investments, the article evaluates their usefulness for a diversification strategy. The role of landmark buildings is studied using the modern portfolio theory and evaluating the role of this type of asset in the optimal asset allocation. The analysis is performed considering both the risk/return trade-off in a one-year and a multiple-year time horizon. Findings The results show that a landmark building can be a good investment opportunity, especially for high-risk/return investors. A not perfect correlation of the returns of this asset class with other types of housing investments implies the existence of a minimum investment in this asset class for almost all portfolios on the efficient frontier. Results are robust with respect to the length of the investment time horizon. Originality/value The article presents a unique analysis of intra-housing market diversification opportunities focusing on the role of landmark building in the portfolio construction. Empirical evidence supports the hypothesis that real estate investors can take advantage of investing in landmark buildings in the residential sector as well because there are no reasons to limit such investments to trophy buildings in the office and commercial sectors.

Sovereign wealth fund investments and policy implications: a survey

2015 ◽  
Vol 23 (3) ◽  
pp. 210-229 ◽  
Author(s):  
Chen Meng
Keyword(s):  
Asset Allocation ◽  
Institutional Investors ◽  
Multinational Enterprises ◽  
Data Access ◽  
Policy Implications ◽  
Investment Strategies ◽  
Content Type ◽  
Comprehensive Survey ◽  
Definition Of

Purpose – The purpose of this paper is to address a research gap by providing a comprehensive survey of sovereign wealth funds (SWFs) as international institutional investors and clarifying the definition of SWFs. By doing so, this paper aims to provide a balanced set of policy prescriptions towards SWFs. Design/methodology/approach – This paper conducted a comprehensive survey of world major 24 SWFs with assets under management of 500 million USD between 2008 and 2012. Key dimensions include objectives, funding and governance, asset allocation and investment activities. Findings – SWFs are planning institutions with management direction. They present great variety in terms of funding mechanism, governance, asset allocation and investment strategies, but they in essence pursue financial returns. It is not evident that SWFs are primarily motivated by political objectives and distinctively different from other international institutional investors. Difficulty in interpreting SWFs should not lead to the imposition of constraints on SWFs. Research limitations/implications – More in-depth and dynamic analysis of SWFs requires better data access. For such a purpose, case studies and longitudinal studies should be adopted, with particular emphasis on comparing SWFs with different types of financial institutional investors as well as typical state-owned enterprises (SOEs) and multinational enterprises. Practical implications – This study is trying to demystify SWFs based on a comprehensive survey. As a result, this paper may assist investors, policy-makers and regulators to gain a better understanding of SWFs, their investment behaviours and rationales behind. Social implications – SWFs like other long-term capital is important for economic and job growth. To attract long-term investments, creating an open, unbiased and welcoming investment environment is the key. Originality/value – The contribution of this paper is that we provide a deeper understanding of the strategy and empirics of SWF operations. First, after a clearer definition of the phenomenon of SWFs, we can explain their investment strategies and behaviour as firms. Second, we can derive rational policy prescriptions, and third, we can propose a research agenda that will further deepen our understanding of SWFs and the appropriate policy prescriptions.

Evolution of framework foresight

foresight ◽  
2020 ◽  
Vol 22 (5/6) ◽  
pp. 643-651
Author(s):  
Andy Hines
Keyword(s):  
Iterative Process ◽  
Design Methodology ◽  
Theory And Practice ◽  
Teaching Tool ◽  
Established Method ◽  
Content Type ◽  
Strategic Approach ◽  
The Future ◽  
Unique Approach ◽  
Practical Implications

Purpose The organization’s core approach to exploring and influencing the future, Framework Foresight, emerged from piecemeal roots in the 1990s to an established method circa 2013. Since then, it has evolved from primarily a teaching tool to a project methodology in its own right. The purpose of this paper is to explore the iterative process that has emerged in which teaching and practice inform and advance one another. Design/methodology/approach Innovations in technique will be highlighted and illustrated by commentary from project experience. The piece will be providing readers with a birds-eye view into the evolution of a foresight method in both theory and practice. Findings The continuous iteration between theory and practice, or the classroom and the client world, provides an excellent means to advance the teaching and practice of foresight. Significant changes include three horizons, inputs, drivers, archetypes, rating scenarios and strategic approach. Practical implications This paper suggests that closer relationships between academia and the external/client world provide practical benefit by improving teaching and providing more innovative approaches for clients. Originality/value The description of the development of this unique approach to doing foresight work provides an example for other programs or firms to emulate.

Factors influencing the propensity of real estate investors in the UK to employ property derivatives

2019 ◽  
Vol 37 (2) ◽  
pp. 194-214 ◽  
Author(s):  
Alexander T. Hanisch
Keyword(s):  
Real Estate ◽  
Explanatory Power ◽  
Real Estate Market ◽  
Theory And Practice ◽  
Original Form ◽  
Content Type ◽  
Research Results ◽  
Asset Class ◽  
The Uk ◽  
Derivatives Markets

PurposeReal estate is the last major asset class without liquid derivatives markets. The reasons for that are not fully known or understood. Therefore, the purpose of this paper is to better understand the main factors that influence the propensity of commercial real estate investors in the UK to employ property derivatives.Design/methodology/approachThe research methodology that was chosen for this research is grounded theory which, in its original form, goes back to Glaser and Strauss (1967). A total of 43 interviews were conducted with 46 real estate professionals in the UK from property investment management firms (investing directly or indirectly in real estate), multi-asset management firms, real estate investment trusts, banks, and brokerage and advisory firms, among others.FindingsThe research results show 29 factors that influence the propensity of direct and indirect real estate investors in the UK to employ property derivatives. Out of the 29 factors, the current research identified 12 factors with high-explanatory power, 6 with a contributing role and 11 with low explanatory power. Moreover, factors previously discussed in the literature are tested and assessed as to their explanatory power. The focus of this paper is on those factors with high-explanatory power. From the research data, three main reasons have been identified as the sources of investor reluctance to trade in property derivatives. The first and main reason is related to a mismatch between motivations of property investment managers and what can be achieved with the instruments. The second reason, which ties in with the first one, is a general misunderstanding as to the right pricing technique of property derivatives. Finally, the third reason is a general lack of hedging demand from the investor base owing to the long investment horizons through market cycles.Research limitations/implicationsThe research contributes to the literature on property derivatives in various ways. First, it extends the literature on market hurdles in property derivatives markets by testing and extending the hurdles that were proposed previously. Second, the research shows that the existing pricing models need to be extended in order to account for the risk perception of practitioners and their concerns with regard to liquidity levels.Practical implicationsFor both theory and practice, the research has shown some limitations in using property derivatives for purposes such as creating index exposure or hedging. Another contribution, in this case to practice, is that this study provides a clearer picture as to the reasons that keep property investment managers away from using property derivatives.Originality/valueThe research results indicate that liquidityper seis not a universal remedy for the problems in the market. In addition to the need for improving the understanding of the pricing mechanism, practitioners should give more thought to the notion of real estate market risk and the commensurate returns that can reasonably be expected when they take or reduce it. This implies that property index futures currently do not price like those on any other investable asset class.

Institutional investor management of Australian healthcare property assets as a pandemic-proof asset class

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Jufri Marzuki ◽  
Graeme Newell
Keyword(s):  
Institutional Investors ◽  
Global Financial Crisis ◽  
Institutional Investor ◽  
Investment Strategy ◽  
Portfolio Diversification ◽  
Portfolio Optimisation ◽  
Empirical Examination ◽  
Data Set ◽  
Content Type ◽  
Asset Class

PurposeAs the prolonged effect of the COVID-19 pandemic has materially impacted investment returns significantly, it is more crucial than ever for institutional investors to redefine their property portfolios using assets with better investment management potential and meaningful diversification benefits. The “alternative asset revolution” is gaining traction in the property investment space internationally among institutional investors due to the shifting investment attitudes towards the alternative property sectors. Australia's $205bn healthcare property sector is at the forefront of this revolution due to its societal significance, as well as its attractive investment qualities. This paper investigates the institutional investor management of the Australian healthcare property sector via both the direct and listed channels and empirically analyses its investment attributes.Design/methodology/approachUsing the unique Morgan Stanley Capital International/Property Council of Australia quarterly data set for Australian direct healthcare property over 2006–2020, the risk-adjusted performance and portfolio diversification potential direct healthcare property and listed healthcare were assessed. A constrained mean-variance portfolio optimisation framework was used to develop a six-asset portfolio scenario to analyse the portfolio added-value benefits of both direct healthcare property and listed healthcare in a mixed-asset investment strategy. A similar set of analysis was performed using the post-global financial crisis (GFC) quarterly time series of 2009–2020 to investigate the healthcare asset class' performance dynamics in the post-GFC investment timeframe.FindingsThe results indicate that direct healthcare property and listed healthcare offer two key advantages for institutional investors in managing their property portfolios: (1) a stable yet superior risk-adjusted performance and (2) significant portfolio diversification potential in managing their property portfolios. Importantly, both direct healthcare property and listed healthcare provided valuable contributions in strengthening an investment portfolio's performance. The post-GFC sub-period analysis revealed a consistent conclusion regarding the healthcare asset class's performance attributes.Originality/valueThis is the first research that provides an independent empirical examination of the strategic importance of Australian healthcare property as a maturing alternative property sector that can serve both investment and environmental, social and governance goals of investors. This research presents a positive investment prognosis for the Australian healthcare property sector to achieve its institutionalised status as a mainstream asset class of the future.

RPI’s James Fund: ETFs, decision making, & manager transitions

2019 ◽  
Vol 46 (5) ◽  
pp. 662-674
Author(s):  
Thomas Shohfi
Keyword(s):  
Asset Allocation ◽  
Individual Student ◽  
Portfolio Performance ◽  
Policy Statement ◽  
Exchange Traded Funds ◽  
Investment Fund ◽  
Fixed Income ◽  
Dormant Period ◽  
Content Type ◽  
Managed Funds

Purpose The James Fund at Rensselaer Polytechnic Institute’s Lally School of Management is a small, recently established, course-driven student-managed investment fund (SMIF). The purpose of this paper is to provide insight to new and existing funds in improving individual fund operation and structure. Design/methodology/approach The James Fund seeks to outperform an 80/20 equity/fixed income benchmark by investing exclusively in exchange traded funds and to move primary emphasis away from idiosyncratic risk and individual equity valuation back toward asset allocation, the most significant driver of portfolio performance. Buy and sell decisions must receive a three-fifths majority in voting among students and adhere with the investment policy statement. Findings Groupthink, a common problem in student-managed funds, is observed in trade proposal and manager voting patterns. Originality/value Groupthink is partially addressed through the use of instructor feedback on individual student trade diaries. Student managers transition each semester; therefore, the portfolio must meet dormant period criteria limited to a specific list of broadly diversified ETFs, mitigating potential problems from knowledge transfer between management teams that are largely unexamined in the context of SMIFs.

The significance and performance of Singapore REITs in a mixed-asset portfolio

2015 ◽  
Vol 33 (1) ◽  
pp. 45-65 ◽  
Author(s):  
Graeme Newell ◽  
Anh Khoi Pham ◽  
Joseph Ooi
Keyword(s):  
Asset Allocation ◽  
Investment Decision ◽  
Portfolio Diversification ◽  
Content Type ◽  
Investment Decision Making ◽  
Strategic Role ◽  
Asset Portfolio ◽  
Asset Class ◽  
And Performance

Purpose – REITs have taken on increased significance in Asia in recent years, with Singapore REITs (S-REITs) becoming an important property investment vehicle since 2002. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of S-REITs in a mixed-asset portfolio context in Singapore over 2003-2013. The post-GFC recovery of S-REITs is also assessed. Design/methodology/approach – Using monthly total returns, the risk-adjusted performance and portfolio diversification benefits of S-REITs over 2003-2013 is assessed, with efficient frontiers and asset allocation diagrams used to assess the role of S-REITs in a mixed-asset portfolio. Sub-period analyses are conducted to assess the post-GFC recovery of S-REITs. Findings – S-REITs delivered strong risk-adjusted returns, being the best-performed asset class, but with little portfolio diversification benefit over 2003-2013. Whilst taking on reduced risk, but with less portfolio diversification benefits in recent years, S-REITs are seen to be robust relative to the other major Singapore asset classes; contributing significantly across the risk spectrum; particularly in the post-GFC period, where S-REITs have been the best-performed asset class in Singapore. Practical implications – The results highlight the important strategic role of S-REITs in a Singapore mixed-asset portfolio. The strong risk-adjusted performance has highlighted the robustness of S-REITs, with S-REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum; particularly in the post-GFC period. This robustness highlights the ongoing strategic role of S-REITs in a Singapore mixed-asset portfolio, as well as the ongoing development of S-REITs as an important pan-Asia hub for REITs. Originality/value – This paper is the first published empirical research analysis of the risk-adjusted performance of S-REITs and the role of S-REITs in a portfolio. Given the increased significance of REITs in Asia, this research enables empirically validated, more informed and practical property investment decision-making regarding the role of S-REITs in a mixed-asset portfolio and S-REIT performance in a post-GFC context.

PRIX – A risk index for global private investors

2017 ◽  
Vol 18 (2) ◽  
pp. 214-231 ◽  
Author(s):  
Sebastian Stöckl ◽  
Michael Hanke ◽  
Martin Angerer
Keyword(s):  
Asset Allocation ◽  
Risk Measures ◽  
Risk Measure ◽  
Risk Index ◽  
Portfolio Risk ◽  
Dynamic Asset Allocation ◽  
Content Type ◽  
Private Investor ◽  
Asset Class ◽  
Private Investors

Purpose The purpose of this paper is to create a universal (asset-class-independent) portfolio risk index for a global private investor. Design/methodology/approach The authors first discuss existing risk measures and desirable properties of a risk index. Then, they construct a universal (asset-class-independent) portfolio risk measure by modifying Financial Turbulence of Kritzman and Li (2010). Finally, the average portfolio of a representative global private investor is determined, and, by applying the new portfolio risk measure, they derive the Private investor Risk IndeX. Findings The authors show that this index exhibits commonly expected properties of risk indices, such as proper reaction to well-known historical market events, persistence in time and forecasting power for both risk and returns to risk. Practical implications A dynamic asset allocation example illustrates one potential practical application for global private investors. Originality/value As of now, a risk index reflecting the overall risk of a typical multi-asset-class portfolio of global private investors does not seem to exist.

The investment opportunities in the innovation-led listed satellite and telecommunication infrastructure sectors

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Jufri Marzuki ◽  
Graeme Newell
Keyword(s):  
Modern Technology ◽  
Growth Potential ◽  
Added Value ◽  
Portfolio Optimisation ◽  
Communication Infrastructure ◽  
Content Type ◽  
Ex Post ◽  
Telecommunication Infrastructure ◽  
Asset Class ◽  
Full Period

PurposeCommunication infrastructure assets present a compelling investment opportunity for investors interested to tap into the technology-driven and innovation-led infrastructure segments, given the need for intensified capital deployment to prepare for the future substantial flow in volume and velocity of information. These communication infrastructure assets exist either in the segments of satellite or telecommunication infrastructure. This paper intends to empirically assess the performance attributes of listed satellite and telecommunication infrastructure over January 2000–June 2019. Sub-period performance dynamics of listed satellite and telecommunication infrastructure in the pre-GFC (January 2000–June 2007) and the post-GFC (July 2009–June 2019) investment horizons are provided.Design/methodology/approachNineteen-year monthly total returns over 2000–2019 were used to analyse the risk-adjusted performance and portfolio diversification potential of both listed satellite and telecommunication infrastructure. The mean-variance portfolio optimisation framework using the full period and post-GFC ex-post returns, risk and correlation coefficient of listed satellite and telecommunication infrastructure and other financial assets was developed to determine the added-value benefits of listed satellite and telecommunication infrastructure in an optimised investment framework.FindingsListed satellite and telecommunication infrastructure delivered mixed investment performance. They were highly volatile and there was a significant discount in total return performance against the other asset classes in the full and pre-GFC periods. However, listed telecommunication infrastructure delivered stronger performance in the post-GFC period across all performance measures. Listed satellite and telecommunication infrastructure offered strong diversification benefits for investors across all investment horizons. Further, the inclusion of listed telecommunication infrastructure in both the full period and post-GFC mixed-asset investment framework was also empirically justified.Practical implicationsCommunication infrastructure assets such as satellite and telecommunication infrastructure are the key infrastructure assets to ensure the seamless operation of and interaction with modern technology going forward. Whilst being a small proportion of the overall infrastructure asset class universe, the $2.1 trillion progressively expanding listed communication infrastructure sector is having an important role to stimulate investor capital deployments in high quality and future-proof communication infrastructure assets. Listed satellite and telecommunication infrastructure assets are an opportunistic investment given their future growth potential and are seen as a suitable fit for investors with a secular investment profile.Originality/valueDespite the infrastructure asset class being the focus of growing attention and empirical analysis, no previous studies have empirically investigated the listed satellite and telecommunication infrastructure sectors. This is the first published empirical research analysis that aims at articulating the investment attributes of listed satellite and telecommunication infrastructure as a route for exposure in technology-related infrastructure assets. This research validates and informs practical property investment decision-making for investors seeking exposure in the increasingly important communication infrastructure assets sector.

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