Australian superannuation funds should consider investing in housing bonds, according to former Prime Minister Paul Keating.
The current system of asset allocation has to be more stable, Keating told an audience at the SuperRatings conference in Melbourne yesterday.
Keating said superannuation funds were happy to invest in listed property trusts, however, these assets have fallen by 74 per cent.
Superannuation funds have copped a big knock to their returns, as a result of the fall in these property trusts, he said.
Funds should be investing in government approved AAA housing bonds, as such an investment allows for a better match between assets and liabilities, according to Keating.
He said the Reserve Bank of Australia could buy these bonds, which would allow instruments such as commonwealth government securities to trade.
These assets could be delivering returns of between 7 and 8 per cent, a marked improvement on the negative returns currently being achieved in the equity market.
Even if a fund improves in performance by 1 per cent, on an accumulative basis these returns add up.
