FILE PHOTO: People are silhouetted against the Sydney Opera House at sunset in Australia
SYDNEY: Inflation is far from tamed despite hopes of a global easing, according to the investment chiefs of two Australian pension funds looking to private assets for protection.
Price pressures will likely remain more elevated than they’ve been for much of the past decade, partly thanks to strong and volatile job markets, said Jonathan Armitage, chief investment officer at Colonial First State Investments (CFS), with A$147bil of funds, including pensions, under management.
“We will see assets change their valuations because the inflation data will continue to move up and down. I think a lot more than people are currently predicting,” Armitage said in an interview.
“And we do think that that is going to throw up opportunities.”
CFS is eyeing investments in data centres, cable networks and renewable energy projects as it seeks unlisted assets that perform well in a higher inflation environment.
The fund has recently made some key internal hires in its investment team as it takes a more active approach to asset allocation, Armitage said.
Sonya Sawtell-Rickson, chief investment officer of A$74bil pension fund Hesta, expects inflation to stay “above or at the higher end of targets” over the next decade, she said in an interview.
As a result, the fund is buying investments to hedge against price pressures, including real assets and inflation-linked bonds.
Factors, including aging populations and the transition to renewables, which will require heavy capital investment, point to inflation remaining high, said Sawtell-Rickson.
Surprisingly mild US inflation reports have spurred expectations that the Federal Reserve (Fed) is nearing the peak of its tightening cycle.
Still, Fed officials have also recently warned of rates staying restrictive, while former Treasury Secretary Lawrence Summers last week said he was concerned about inflation picking up after wage growth was higher than expected in July.
The next US inflation data is to be released today. — Bloomberg
