Cruise the alternatives

THE next time you complain about paying that toll or outrageous airport parking fee, remember you might be paying yourself.

Cruise the alternatives

THROUGH your super fund, you probably own a part of some key infrastructure assets in Melbourne, Sydney, Brisbane and throughout Australia. These are known as alternative assets.

If so, you are reaping the benefits, because your retirement savings are achieving booming rates of return, largely insulated from the recent turmoil on stock markets.

Those people stuck in funds who did not jump on the alternative asset bandwagon a few years ago are seeing more modest returns.

Many retail funds traditionally favour fixed interest investments but during recent times they have also been looking at alternative unlisted asset classes.

The latest results from the superannuation survey indicated those funds which had the highest returns had interests in alternative assets.

Industry superannuation funds continue to deliver the highest returns for their members, according to the survey.

This is not just through lower fees but also through their direct and indirect investment in infrastructure and big commercial property assets such as toll roads, city skyscrapers, huge residential developments, retirement villages and airports.

Melbourne Airport is part owned by super funds, as is Southern Cross Station.

Industry Super fund MTAA got in early, buying into Sydney's M2 motorway and other infrastructure assets four and five years ago. And its members have been suitably rewarded. Its default balanced option returned 19.2 per cent over the 12 months to August 31 and 17 per cent over the past three years.

The MTAA balanced option exposes almost half (42.2 per cent) of its member funds to the alternative asset-heavy "Target Return Portfolio". Another 29 per cent of member funds are invested in the Australian share market.

"The problem the funds are facing is finding a home for these great wads of cash," says SuperRatings chief executive Jeff Bresnahan.

Building industry super scheme Cbus has a $12 billion wad of cash to invest on behalf of more than half a million workers.

Alternative assets invested in by this fund include a site at the corner of Bourke and William streets which is a Cbus owned development of two premium quality office towers with five-star green ratings.

The redevelopment of the old Herald and Weekly Times building into a 35-storey glass tower was a Cbus project as was the Victoria Gardens premium residential and commercial redevelopment in Richmond.

The alternative asset strategy is not inherently riskier than traditional fixed interest and equities markets, according to Mr Bresnahan.

"The only difference is you are relying on the valuation to be accurate, whereas shares are based on day to day trading," he said.

Industry Funds Network spokesman David Whiteley said there were structural reasons why industry funds outperform their retail competitors but the most obvious reason was their early investment into alternative assets.

"Industry funds went big early into infrastructure, private equity and property, they were also early adopters of hedge funds," Mr Whiteley said.