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Australia's Top Pension Fund Buys Stocks, Shuns Cash, Bonds

Australia's Top Pension Fund Buys Stocks, Shuns Cash, Bonds

(Bloomberg) -- Australia’s best-performing pension fund is going against the grain by avoiding cash and bonds, betting the 30-year investment horizon of its youthful members means it can ride out looming economic shocks.

Host-Plus Pty, which represents swathes of the country’s baristas and restaurant waiters, has about 53 percent of its A$40 billion ($28 billion) in equities and the remainder in unlisted assets including airports and water-cleaning plants, said Chief Investment Officer Sam Sicilia.

Australia's Top Pension Fund Buys Stocks, Shuns Cash, Bonds

We have “a lot of cash coming in, not a lot of cash going out,” Sicilia, 56, said in a recent interview in Melbourne. The firm’s “demographic hasn’t changed significantly to want to change the shape of our asset allocation.”

The investment strategy is at odds with the majority of Australian pension funds who dialed back risk in recent years. As a global expansion ebbs and many of the world’s central banks move to loosen policy to stoke growth, it’s a test for a fund that’s regularly among the top performers over the past decade, a star player in the nation’s A$2.65 trillion so-called superannuation pool.

Hostplus beat local peers with a 10 percent return over three years ended Jan. 31, according to Lonsec Group. It’s also top ranked over five years, up 8.9 percent and outpacing the country’s largest pension fund AustralianSuper Pty, the data show. Hostplus has held no cash since at least 2011 and bonds in its portfolios were effectively zero over the past three years, according to Hostplus. The firm prefers stakes in office buildings, pipelines and emerging technology.

Australia's Top Pension Fund Buys Stocks, Shuns Cash, Bonds

Part of that success is due to the fund’s ability to stomach less liquid unlisted assets, Sicilia said. With compulsory payments from employers in Australia ensuring regular inflows from more than 1 million young hospitality, tourism and recreation workers, those demographics afford the fund a greater appetite to take risk, he said. The average age of those saving for retirement in the fund is 35.

“We have the cash flow to do that and we know unlisted assets provide downside protection from the volatility of equity markets,” he said. “And so we take advantage of that characteristic, and that’s what drives this fund.”

To contact the reporter on this story: Matthew Burgess in Sydney at mburgess46@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, ;Edward Johnson at ejohnson28@bloomberg.net, Adam Haigh, Andreea Papuc

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