An investment in an unlisted asset class like infrastructure can help to shield your retirement savings from market ups and downs.
You’ve worked hard, saved hard and you’re looking forward to a comfortable retirement. That’s how it will work out a lot of the time – but not always. Just ask anyone about to retire as the global financial crisis hit in 2007 – they had to watch as their retirement savings took a substantial hit.
While compulsory superannuation has been around for three decades, not everyone will be fortunate enough to have enough money to retire comfortably. And depending on when you retire, there is a potential for your super balance to be eroded on the whims of the share market.
However, there is a way to invest that could help protect your nest egg from market volatility and help manage the risk of outliving your retirement savings.
Allocating some of your superannuation funds to unlisted assets such as infrastructure – an asset class that usually isn’t tied to the fortunes of the share market – is one way of doing this.
There is a way that could help protect your nest egg from market volatility.
Characteristics of infrastructure investments
Infrastructure assets are essential services such as toll roads, airports, ports and desalination plants. These kinds of assets are usually not listed on the share market, so their prices don’t move up and down with the market. Instead, they are priced based on independent valuations which take into account the different economic impacts that could influence their value.
Infrastructure assets are long-dated, low-volatility assets which have traditionally been strong cash-flow providers – all attributes which align with the retirement goals of most Australians.
Public private partnerships (PPPs) are not the only form of infrastructure investment transactions. Government privatisation can allow for the purchase of a previously government-owned asset. Or a large organisation might look to divest part of its non-core business.
While many infrastructure assets are acquired as part of structured sales or bid processes, there is also an opportunity to be considered and to time investments to best maximise value for members. For example, Hostplus was part of a consortium that took Sydney Airport private at a time when international travel was at an all-time low as a result of Covid. It meant the consortium were able to better negotiate the price of the airport, with the understanding that even though flights might not be as frequent because of the pandemic, they would eventually recover.
PPPs are not the only form of infrastructure investment transactions.
The benefit of portfolio insulation
An unlisted asset like infrastructure adds an extra layer of diversification to an investment portfolio and provides an additional ballast to traditional bonds and equities.
Such assets were previously difficult for small investors to access. However, self-managed superannuation funds can invest in them via Hostplus Self-Managed Invest (SMI). The SMI options enable more superannuation investors to add non-traditional investments to their retirement savings.
Read more about Hostplus SMI and how to invest, by reading the product disclosure statement here.
To learn more about Hostplus Self-Managed Invest, please send our team an online enquiry or call us on 1300 350 819.
This information contains general advice only and does not take into account your personal objectives, financial situation or needs. You should consider if this information is appropriate for you in light of your circumstances before acting on it. Past performance is not a reliable indicator of future performance and should never be the sole factor considered when selecting a superannuation fund.
Please read the Hostplus Self-Managed Invest (SMI) Product Disclosure Statement (PDS), available at smi.hostplus.com.au before making a decision about Hostplus SMI. For a description of the target market, please read the Target Market Determination (TMD), available at hostplus.com.au.
Hostplus Self-Managed Invest (SMI) is issued by Host-Plus Pty Limited ABN 79 008 634 704, AFSL 244392 as trustee for the Hostplus Pooled Superannuation Trust (PST) ABN 13 140 019 340.
The information in this article is correct as at the time of publication.