Alan Kohler
RBA's super gamble
If a certain insouciance was evident in Friday’s speech in London by Reserve Bank Governor Glenn Stevens, if not downright optimism, at least he’s putting his own money where his mouth is.
According to the bank’s annual report, the fund’s allocation to private equity and alternatives increased from 7.8 per cent in 2006 to 13 per cent last year. In 2005 it was 6.7 per cent – half what it is now.
Even more decisive, perhaps, was the buying of Australian shares – up from 21.3 per cent in 2005 to 41.7 per cent in 2007.
That means the fund’s exposure to risk assets when the current correction/bear market hit in November was 63 per cent, up from less than 30 per cent in just two years.
This is an extraordinarily optimistic stance for any super fund, let alone the one for officers of what is supposed to be the most conservative institution in Australia.
The money for the extra allocation into risk assets came from cash (down from 14 per cent to 5 per cent over two years) and fixed interest (down from 17 per cent to 7.1 per cent).
Reducing the weighting of bonds over the past two years is reasonably prudent, given the persistently low yields, but RBA staff must be wishing there was more than 5 per cent in cash right now.
Then again, it’s mostly a defined benefit fund so there is only partial exposure to its ups and downs. The annual report says: “Most members receive a Bank-funded defined benefit in accordance with the rules of the fund; other member benefits include unitised defined contribution accumulation balances, which comprise the RBA’s productivity and superannuation guarantee contributions and members’ personal contributions, plus earnings on these contributions.”
The way things are going, the RBA might have to kick some money in this year - there’s not much of a buffer, according to the fund’s balance sheet.
The net market value of its assets at June 30 last year was $796 million, up by $124 million, or 15.5 per cent over the previous year (although what’s called the “actuarially assumed return on plan assets" was $44 million, or 5.5 per cent).
The net “closing superannuation asset” (market value minus accrued benefits and losses) is $49 million, which appears to be a buffer of 6.2 per cent between assets and liabilities. If that’s true, it could well have been wiped out since June 30.
Not that it matters much - beyond bragging rights - for the Governor and his staff, since it’s a defined benefit fund. But would you want them running your super?
Related Industry Sectors
Related People