The scary thing about the market right now is that super funds can't agree on where it's heading

Left or right? Joe Raedle/Getty Images

Some are preparing for a major market correction, taking defensive positions, while others see growth continuing.

The investment managers at Australia’s top 50 superannuation funds can’t agree, for the first time in many years, where the equities market, in Australia and globally, is heading.

Half think values will rise and the other half see a correction within the next two years, according to an informal survey of about 130 super fund staff by AXA Investment Managers.

“The most interesting takeaway (of the survey) was the indecision or uncertainty,” Craig Hurt, AXA Australia-New Zealand director, told Business Insider.

“I’ve been in this industry for 20 odd years and I’ve never seen a 50/50 split in terms of whether the market is going up or down.”

The usual split is 80% to 20%, either up or down. The big question, depending on what you believe, is whether to seek a defensive position or go for growth.

“This level of uncertainty is happening at the same time there is a watershed moment in the Australian superannuation industry which is the transition from accumulation to post retirement,” Hurt says.

Superannuation, now a pot of $2 trillion in savings, is transitioning from one investment strategy to another.

“Basically for 20 odd years we’ve had this massive wall of savings going into the superannuation industry,” he says. “Now in the retirement phase you’re not looking for growth, you’re looking to generate income, returns in excess of inflation. And you’re trying not to lose money because you no longer have salary to replenish losses.”

The struggle will be to find good returns and provide retirement income at a time when interest rates are at record lows and there is low economic growth.

At a roundtable event run by AXA last week, the replies to the survey showed concern over returns in a low interest rate environment. More than three-quarters (77%), noting the need of retirees for income, said they were going to evaluate options to enhance returns on Australian cash and fixed interest portfolios.

“We’re going into a period in the next ten years when the uncertainty range is the highest it’s been since the early 1970s,” Hurt says.

“So that ability to introduce some sort of defensive element into your portfolio and diversify your risk will separate the winners from the losers in the next ten years, certainly in the Australian market.”

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