(Bloomberg) -- Australian pension fund Brighter Super is switching billions of dollars of equities assets to active management, as it bets increasing volatility will create a widening chasm between winners and losers in listed markets.
Since its creation via a merger three years ago, the A$33 billion ($21 billion) fund has passively held the stocks in its default investment option, of which local equities make up 24% and global shares 32%. It’s now putting about a third of those holdings into the hands of active managers, said chief investment officer Mark Rider, citing the macroeconomic environment as a key reason.
“We think there will be more volatile inflation, more volatile growth,” Rider said in an interview. While the decision was made before Donald Trump won the US election, his return to the White House “strengthens the case for wanting to do it, because of what it does to macro volatility,” he said.
The increased concentration of markets was another factor in the switch to stock pickers, Rider said, including the rise of the so-called Magnificent Seven tech giants in the global portfolio and the strong performance of the Big Four banks domestically.
“You are effectively delegating to your managers to help you deal with that,” said Rider. “Whether it’s picking particular stocks within the sectors, or maybe potentially it could be avoiding them altogether.”
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Passive investments have surged in popularity in recent years. Such strategies have helped cut costs for pension fund members in Australia’s fast-growing A$4.1 trillion industry, which is facing tighter scrutiny over performance and fees. The decision to move a third of its stocks back to active management would have a limited impact on fees, Rider said.
While the equities in Brighter’s default investment option have been passively managed until now, other options have included some active management, Rider said.
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