Another Lehman-size crisis is possible: Nasfund

NASFUND, which has often outperformed Australian superannuation funds, is struggling to find double-digit growth investment options as it views that a double dip recession could hit Europe and the United States.
Another Lehman-size crisis is possible: Nasfund Another Lehman-size crisis is possible: Nasfund Another Lehman-size crisis is possible: Nasfund Another Lehman-size crisis is possible: Nasfund Another Lehman-size crisis is possible: Nasfund

The risk of potential Kina currency strengthening on the back of PNG LNG and the PNG's mining boom is limiting the super fund's options to buy equities in Australia, and it said the local equity and property markets had generally "run out of steam".

Nasfund is not buoyed by the risks presented by the political change sweeping the Middle East, and how they could spike oil prices, or by the US government's struggle to overcome its "mounting debt problem".

The fund is even less optimistic about the ongoing European sovereign debt crisis.

"In Europe we see Greece on the edge of financial default, Ireland in financial trouble with Italy, Spain and Portugal not far behind," Nasfund said in its world outlook.

"Debt default in Greece will reverberate throughout the eurozone, with the expectation that this is the next American Lehman Brother's style crisis.

"In the States, talk of a double dip recession increases, this time with very restricted tools for increasing economic activity."

While talk of China's debt problems and its associated real estate bubble also comes up in bearish quarters, Nasfund said the Chinese economy remained strong over the long term.

In a world it says is resonating elements of the 1930s, Nasfund appears keen to adopt a more defensive investment strategy.

"It is becoming clearer that we cannot expect double digit returns for the fund moving forward over the next few years with the world heading for what could be described as a consolidation period if not a general malaise/double dip recession in the west," Nasfund said.

"There is just no asset sector able to drive substantive return and we will need to now understand that the golden run is drawing to a close as returns retrace back to more sustainable levels."

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