Australian Super Funds Under Criticism Due to Unlisted Assets

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Industry Superannuation Funds, commonly known as ‘super’, is the money set aside by an employer for its employees that will act as their retirement funds. The multi-billion-dollar industry is known for owning significant unlisted assets, which is now heavily criticised.

Super is a vehicle for the government to build more affordable housing for the country. Still, concerns raised by some of those in the industry and a few conservative politicians was that super funds might not be liquid enough should the government proceed with its early-release scheme to ease the burden of many Australians impacted by Covid-19.

Another concern raised was the fund’s ownership of significant unlisted assets had raised questions on the transparency of the valuation of unlisted assets. According to the report published by Atchinson Consultants, the proportion of industry funds’ investment in all unlisted assets increased by 23 per cent from 18 per cent the previous year.

According to Atchinson Consultants Jake Jodlowski, the significant increase in unlisted assets was partly driven by market volatility. He adds, “Unlike equities, which are marked to market, there is a lag in valuing some of the unlisted infrastructure and property assets. The valuation of unlisted assets may not be a perfect fair-value calculation at a point in time. Therefore, in a strong upward market, valuations may be ‘stale’ and unvalued; vice versa to that in a strong down market.”

However, according to Sam Sicilia, CIO of Hostplus, unlisted assets have ‘monopolistic’ and ‘inflation-beating’ characteristics, which helped Hostplus retain the top position as Australia’s best-balanced superannuation fund. Hostplus was one of only three funds that could make money for their members.

Alister Barker, head of total portfolio management at AustralianSuper, also discussed that unlisted assets may provide stability in the portfolio as it diversifies returns through market cycles. “Unlisted assets’ long-term value, relative return stability and contribution to portfolio diversification help the fund realise its mission, which is to help members achieve their best financial position in retirement,” Barker adds.

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