POWERED BY MOMENTUM MEDIA
UniSuper reassures members on liquidity
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.”
Recommended for you
Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Coalition, which has pledged to reverse any changes if it wins next year’s election.
In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges.
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
Specific valuation decisions made by the $88 billion fund at the beginning of the pandemic were “not adequate for the deteriorating market conditions”, according to the prudential regulator.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
