Agri, timberland and infra make up more than 9% of VicSuper’s FUM

Australian superannuation fund VicSuper increased its total funds under management to A$23.7 billion ($16.4 billion; €14.7 billion) as of June 30, according to its latest annual report.

Infrastructure, agriculture and timberland remained an important part of its strategy in the year. Aggregate funds under management in these asset classes were approximately A$2.2 billion, or 9.2 percent of total FUM, at the end of June.

The fund said that its balanced option – with a strategic asset allocation of 16 percent to real assets, under which agriculture and timberland fall – achieved a return of 8.64 percent last year. This was up from the 7.71 percent achieved in 2017-18 and was higher than the five-year return figure of 8.25 percent.

In the agriculture and timberland space, VicSuper said it had deployed funds with three external managers: Campbell Global, Kilter Rural and Stafford International.

It also announced that it had reached its target of deploying A$3 billion, or around 12 percent of its total FUM, in sustainable outcomes one year early, having set a target of mid-2020 to reach this figure. Of this, A$349 million has been invested in plantation timber and sustainable agriculture to help meet this goal.

The fund undertook an assessment of its real assets portfolio’s exposure to climate change risk, finding that 14.4 percent of the portfolio was exposed to “extreme risk”. This included Queensland-based assets exposed to extreme flooding risk, the fund said. It also found that its agriculture assets were exposed to impacts from natural catastrophes and a reduction in the availability of resources.

In a statement, VicSuper chief executive Michael Dundon said: “With the [Australian] superannuation sector managing close to A$3 trillion, it’s essential funds report on where that money is invested, what impact those investments are having on society, and whether that meets our community’s growing expectations of responsible investment.

“As our funds under management grow, so does our responsibility to the broader society, above and beyond providing our members with the best possible retirement outcomes. We can do both.

“We’re taking steps to align our decisions and activities with eight [of the UN Sustainable Development Goals] because we know that as a responsible superfund, we have a role to play in contributing to this important global agenda while continuing to deliver great outcomes for our members.”

VicSuper is in talks over a merger with First State Super that would create Australia’s second-largest superfund, with more than A$115 billion of funds under management. Due diligence on the merger is underway, with a tie-up expected in 2020 if negotiations progress smoothly.