Australian pension funds log single-digit returns for the year

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By Scott Murdoch

    SYDNEY, July 2 (Reuters) - Australia's A$4.5 trillion pension fund industry participants are preparing their closely watched June-end financial year accounts for the country's nearly 18 million members, with some major funds expecting returns of less than 10%.
Australian Retirement Trust (ART), which has A$370 billion in funds under management and is the country's second-largest fund said it expects its default high-growth option fund to report a return of nearly 9% for the past financial year.
The result will be finalised on Friday, but ART said the fund should achieve a 10% return per annum over 10 years.
HESTA, which has A$105 billion in funds under management, said its default fund recorded a 9.4% return for the past year.
Australian pension funds have recorded one-year returns of between 9% and 11.4% over the past two financial years for balanced and high-growth funds, according to SuperRatings.
Australian shares make up a major part of each super fund's different options, and the country's benchmark S&P/ASX200 .AXJO has returned just 2.8% in the past year.
ART and HESTA investment chiefs say AI companies are not in a valuation "bubble", but the sector's leaders need to start boosting earnings to justify their hefty debt-funded capital spending.
As of March 31, ART's holdings included all of the "Magnificent Seven" U.S. tech companies. It also owns SpaceX SPCX.O shares.
"We don't think there's strong evidence it's a bubble," said Andrew Fisher, ART's general manager of total portfolio management and resilience
"When everything's funded by equity, those markets have a lot of patience. Debt markets do not, when you start taking on debt, you have to deliver back earnings," he said.
HESTA's deputy chief investment officer Jeff Brunton said the fund focuses on diversifying investments along the AI value chain.
"We've continued to invest into global digital real estate leveraging the critical land and contracts and leases underlying the digital networking sites like data exchange centres and cell towers," Brunton said.
A number of major funds are still finalising their one-year returns and are due to report the data shortly.     

 (Reporting by Scott Murdoch; Editing by Sonali Paul)
 ((Scott.Murdoch@thomsonreuters.com;))