Members of big industry fund UniSuper have collectively switched $2 billion from growth to defensive assets, according to the fund’s veteran chief investment officer, John Pearce.
However, the fund is claiming sufficient liquidity to comfortably manage the switching.
The confirmation of the switching has come at the same time as other funds have confirmed increases in member investment switching and as both UniSuper and AustralianSuper were reported to have undertaken a downward revaluation of their unlisted assets.
In a message to members, Pearse said that the fund’s conservative approach to liquidity had stood it in good stead.
“Despite members having collectively switched $2 billion from growth to defensive assets (mainly the cash option), we’ve been able to comfortably manage without selling shares at prices we believe are too cheap,” he said.
“Another way of looking at it—we’re effectively using our cash to buy the shares that members are selling. The strength of our liquidity position is such that we plan to continue the strategy for the foreseeable future.”
Pearce also sought to reassure members about the funds cash option, notwithstanding declining interest rates.
“Unlike bonds, there have been no surprises with cash, and that particularly applies to our cash option which is conservatively managed,” he said. “In a world chasing yield, we’ve seen evidence of funds increasing the credit risk in their cash options to enhance returns. We have never been tempted.”
“We work on the principle that the cash option is there to preserve wealth, not grow it. As interest rates trend toward zero, we would expect returns on the cash option to follow and they may even dip to slightly negative after fees and taxes. However, the only way our cash option could incur a permanent loss of capital is in the event of a bank default, which we consider highly unlikely.”
BlackRock boss Larry Fink praised Australia’s superannuation system in his annual chairman’s letter.
The prudential regulator has announced it will publish new expenditure data of superannuation funds, providing details on expenses like advice, director remuneration, and payments to unions.
Affirming the UK’s growing attractiveness as an investment destination, a number of Australia’s largest investors recently joined the UK Foreign Secretary for an exclusive briefing in Canberra to discuss further opportunities for trade and growth.
The specialist superannuation law advisory practice is set to wind up, with managing partner Jonathan Steffanoni planning to bring a new offering to market.
Add new comment