LGIAsuper sets new strategic asset allocation

LGIAsuper announced new strategic asset allocation targets to better position the A$13 billion ($9.1 billion), Brisbane-based super fund for a post-COVID investment environment.

The changes, announced Tuesday, are aimed at generating the income participants need in retirement in a market environment where "capital gains will be harder to generate," Troy Rieck, LGIAsuper's chief investment officer, said in an email.

Effective Nov. 1, allocations to Australian shares, infrastructure and cash were increased at the expense of real estate, traditional bonds and overseas shares, a news release said.

For example, targets for the fund's "My Super 75 Plus" investment option saw allocations to Australian equities rise 4.5 percentage points to 13.5% while overseas equities dropped by the same figure to 16.5%.

Alternatives exposures were likewise remixed, with real estate dropping to 9% from 15% and infrastructure adding one percentage point to 11%.

A 3% weighting in cash was added, together with a 5% target for "private capital," a new category covering "private equity, private credit, agricultural investments and opportunistic property and infrastructure strategies," Mr. Rieck said in the email.

The changes reflect a "strong emphasis on moving up the capital structure," given the high valuation of listed equities now and low long-term expected returns, he said.

"We need to generate more income, whether that is franking credits on Australian shares, credit income from loan strategies, rental income in property and infrastructure or other income generating approaches, he said.

Although LGIAsuper pointed to current market valuations for decisions to unwind a long-held overweight to overseas shares in favor of adding to domestic equity holdings, Mr. Rieck said the changes announced Tuesday are more strategic than tactical.

"The strategic asset allocation changes that we've made are more in line with ten year views of the world," he said, adding "we still believe that diversification is our most effective form of risk management."