We cannot underestimate humans: Sicilia

Hostplus chief investment officer Sam Sicilia believes the superannuation fund's investment portfolio displays similar characteristics to humans, being resilient no matter what circumstances it may encounter.

Sicilia said both humans and an investment strategy need to be resilient to adverse outcomes and have the ability to bounce back when bad things happen.

"Humans are adaptable, flexible, and they don't let catastrophe derail them for too long," Sicilia said.

"They can take advantage and protect themselves by doing A instead of B in a nimble way. An investment strategy that has those desirable characteristics is what we have built."

The chief investment officer believes the $26 billion industry super fund has been given a "free-kick" when it comes to managing the nimble and human-built investment strategy it runs today. A young member base which is not retiring anytime soon, compounded by large cashflows coming in and little money leaving "gives you firepower" as well as a longer time horizon over which to invest.

Rainmaker Information shows in the 12 months to 30 June 2017, the top ranked MySuper single investment strategy was Hostplus with an annual return of 13%. The industry fund was awarded the Rainmaker SelectingSuper Fund of the Year in 2014 and 2015.

In recent times the super fund has increased its allocation to liquid alternatives to park money awaiting investment opportunities to emerge.

Sicilia said super funds with flexible and resilient investment strategies can best adapt to political influences and populist outcomes.

He said the global increase of populism weighs on his mind constantly. Speaking to Financial Standard after an annual national roadshow where he delivered lectures on "Populism Rising", Sicilia said the power behind human aggregation has shifted in the last 80 or so years.

This aggregation shift and the rise of populism effects politics, economics and global markets and therefore it effects superannuation.

"Why are people so disenfranchised with political parties and the political process? If you're a millennial you typically think that democracy isn't working the way it should. So what's causing this - what caused Trump, Brexit and Macron?" Sicilia said.

He explained political correctness is one area that stifles public debate and it becomes a place for populists to thrive.

"We've lost the ability to engage in debate with intention to persuade," he said.

"The only way people can vent is at the election booth when no-one is watching. If you and I can't have a conversation then the differences between us remain.

"If you think that the populists we have now are amateurs, well wait until you reach Generation 2.0 and 3.0 - they'll be more sophisticated, more polished and they'll be more to the centre."

Fuelling populist claims is a disparity in wealth and technology being "massively deflationary" Sicilia said.

He questions why the Reserve Bank of Australia governor said to the Australian people 'go ask for a wage rise,' but nobody queued outside their HR manager's door on Monday morning?

"Tell me who wouldn't want a wage rise, so why are people not going to get it? You can't just dismiss that. It's a phenomena that requires an answer," he said.

It's all part of a scenario where too many people are waiting to go back to normality, Sicilia believes. He said too many people can't think for themselves as to what will happen because they are trapped by what should happen.

"On the surface it is not investments but we link it back and say 'when we are in unchartered waters with unprecedented economic storms, when the world's never been here before - do you sit on the sidelines and wait for normality to return like the Reserve Bank is doing or do you dance in the rain?" he said.

"Learn to dance in the rain, learn to make decisions using intuition - not simply rely on spreadsheets."

Read more: HostplusSuperannuationSam SiciliaReserve Bank of AustraliaBrexitFinancial StandardMacronMySuperRainmaker InformationSelectingSuperAlternatives
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