A leading figure in Australia’s pension industry has questioned the role of bonds as a hedge against declining share values in a portfolio, as interest rates are so low.

Mark Delaney, deputy chief executive and chief investment office of AustralianSuper said fixed income investments might increase risks instead of reducing them.

“Buying bonds at the moment means we are paying a very expensive price for insurance,” he told delegates, “You have got to work out what and why you are hedging,” he said.

The danger was that fixed income investments might not deliver what the fund manager might think they had promised. Delaney said that returns equity markets in developed countries had been disappointing, but that the long-term view

 Delaney said that reducing allocation to equities in favour of fixed income at the moment could be like buying fire insurance after a fire. The chances were that inflation would pick up again. Yields at the long end of the curve suggested this. He said the chances were that inflation in 30 years time would be higher than today.

“I’ve been an investor for thirty years, and I have never seen a period of negative inflation, except for Japan, and there have been very few periods of falling prices over the last 100 years.”

AustralianSuper was created in 2006 out of the merger of the Australian Retirement Fund and the Superannuation Trust of Australia. It manages A$33bn of assets.