Insignia gains from alternative outlook

Investments in alternative assets and soaring equity markets have boosted the superannuation returns of the ASX-listed wealth manager.

Investments in alternative assets and soaring equity markets have boosted the superannuation returns of ASX-listed Insignia Financial, which is eyeing opportunities to grow its private credit business in areas where banks have retreated from the market.

The company, made up of brands including MLC and IOOF, reported double-digit returns across most of its funds in the year to June, including two of its three default MySuper options.

The MLC MySuper Growth fund returned 9.8 per cent to members, IOOF MySuper delivered 10.7 per cent and ANZ Smart Choice MySuper generated an 11.2 per cent return.

Dan Farmer, the chief investment officer overseeing the bulk of Insignia’s $180bn superannuation business, said a neutral position on global equities throughout the year, and selective investments in the fast-growing technology sector, had supported annual returns to members.

“One of our key principles or key philosophies is to be really well diversified and run robust portfolios that perform well through time,” he said.

“There’s a lot of discussion around tech, and we hold good allocations to technology stocks via our active managers … who have generated 2 per cent alpha over and above the index, but have actually been slightly underweight tech through that period.

“So it’s not all about tech. We’ve found we can deliver good excess returns in the strong international equity asset class through solid active management.”

As part of a “differentiated approach” towards unlisted assets, several of Insignia’s funds invest in niche markets which have also proven to be fertile ground for returns, Mr Farmer said. They include investments in weather-related reinsurance, primarily in Florida, which generated a 16 per cent return in the year to June.

Private credit is another area where major funds are hunting for opportunities, according to Mr Farmer, as they challenge the banks as a source of capital for corporate borrowers and investors. “We still see very attractive opportunities in that global private credit space,” he said.

“We acknowledge that there’s been a lot of capital — a lot of funds have been investing into that space, but with banks retreating and the return profile we’re seeing in that space, we still think it’s very attractive.

“We’re looking at more opportunistic private credit, so niche areas where we think capital is being starved in these very niche areas, and there’s some really attractive opportunity.

“As an example of some of the areas we’re looking at … we’re generally underweight commercial real estate, so office, but we’re starting to see select opportunities in say northern European distressed property.”

Insignia’s annual superannuation returns were released a day after rivals Colonial First State and AMP reported financial year returns up to 14.3 per cent and 11.1 per cent in their default MySuper options respectively.

Retail funds have generally outperformed industry funds, which have been weighed down by falling commercial property and unlisted asset prices.

Mr Farmer said Insignia retained a neutral weighting in global equities, but added “we’re increasingly seeing potential opportunities to the upside”.

Elections in the UK, US and France would all have an impact on global markets in the months ahead, he noted, along with the path central banks choose to take in tackling persistent inflation.

“We have a view that rates (in Australia) are close to a peak, so we may get the August increase but we … think that we’ll see that inflation continue to temper over the coming months, which will allow the RBA room to start easing into 2025.”