Queensland-based superannuation fund Sunsuper has appointed Ibbotson Associates Australia to provide it with consulting services.
Ibbotson will advise the $18 billion fund on dynamic asset allocation, in which it looks at how economic developments, investor sentiment and asset price valuations influence Sunsuper's investment portfolio in the medium term.
The service is intended to overcome some of the problems of the strategic asset allocation model, in which superannuation funds use a fixed allocation to shares and bonds regardless of market movements.
The global financial crisis showed the shortcomings of this model, as almost all sectors of the equity markets experienced a sharp decline, while funds could not reduce their exposures to these markets.
The service does not seek replace the existing investment model, but can be used to introduce tilts to the portfolio, skewing investments to sectors or regions that are likely to have good performance or lower risks.
"It can be used to build portfolios based on strategic asset allocation. It provides real-world solutions that people can implement in their portfolios," Ibbotson managing director and chief investment officer Daniel Needham said.
"We don't provide advice on individual securities, but can drill into sub-sectors of the economy and offer regional perspectives."
The fund can change its asset allocation within its established allocation ranges, but Sunsuper chief investment officer David Hartley pointed out that much could also be done within the asset classes themselves.
"There is a lot you can do inside asset classes. For example, you can choose between small companies and large companies, active strategies and passive strategies, and between sectors, such as industrials versus consumer discretionary stocks," Hartley said.
"It is about looking at our objectives and saying: 'Is there a way that we can more likely meet our objectives?' There is performance, but there is also risk. You have to look at risk as well."
The service is built by Ibbotson in Australia, but gets input from the company's United States-based team as well.
Ibbotson said the service was likely to be offered to international clients over time too.
The appointment of Ibbotson is in addition to Sunsuper's primary investment consultant, Mercer, which was reappointed in September.
