Industry funds reject redemption freeze concerns

On Tuesday, Stockspot chief executive Chris Brycki tweeted that Hostplus had changed its product disclosure statements (PDS), replacing a previous section that had referred to switches between investment options being processed “on every national business day” to a new section that allowed the trustee to “suspend or restrict applications, redemptions and withdrawal requests”.

There has been speculation around the liquidity of funds ahead of the early super release measure being implemented, particularly concerning their allocations in illiquid and unlisted assets.

Mr Brycki told ifa more disclosure was “desperately needed” in the industry super space and that members needed access to more information around how the market downturn is impacting unlisted asset valuations.

But Hostplus hit back at coverage around its PDS, saying it was “misinformed”.

As far as the fund is concerned, it has updated the statements in accordance with its program, pointing to its “long-standing governing rules and discretions” as they relate to investment pricing and transactions.  

“Alongside other superannuation funds, Hostplus’ Trust Deed prudently (like others) empowers its trustee with a broad discretion to suspend or delay unit pricing in extraordinary situations to ensure equity, fairness and balance in investment pricing and transactions in the best interests of all members,” Hostplus stated.

“In Hostplus’ case, this trustee power is not new. It is not unique. It is not exceptional.”

It has also said it is committed to allowing its members to access their money under the early super measure.

Mr Brycki compiled research finding Hostplus has a 38 per cent allocation to unlisted assets in its balanced fund and an equities portfolio with an estimated worth of $16 billion.

The fund recently slashed the values of its unlisted assets by a range of 7.5 per cent to 10 per cent, saying the COVID-19 crisis had struck its infrastructure and property investments. It also decreased its private equity and venture capital investments by 15 per cent on average.

With the majority of the fund’s 1.2 million members facing unemployment, Mr Brycki has said it is likely the fund’s listed holdings would be insufficient to meet maximum member redemptions of $20,000 each. He also raised similar concerns around retail industry fund REST.

But a spokesperson for REST told ifa the speculation around funds choosing to suspend payments was unfounded, given that legislation dictates funds must release the withdrawals as quickly as possible when directed to by the ATO.

“Rest has extensive fund assets including cash, and other liquid assets, and we are comfortable about managing our illiquid assets such as property and infrastructure,” the spokesperson said.

“We are currently well placed to support the early release measures when they become available from 20 April.

“We are also stress testing our liquidity position regularly, and are currently comfortable with our financial position to handle a variety of early release scenarios.”

More than 95 per cent of its members are invested in its default Core strategy, according to REST. As at 29 February, REST’s allocation in Core to shares and cash was around 50 per cent.

REST has also lowered the value of both its property and infrastructure asset classes, telling members invested in the property option it had shaved the property class value by 8.56 per cent.

However, the fund did not disclose how much the infrastructure investments were devalued by, saying the amount is “confidential” as it doesn’t offer a standalone infrastructure investment option.

House of Representatives standing committee on economics chair Tim Wilson has criticised the super industry for raising claims of liquidity issues with the government, after the committee’s hearings with the sector in November saw funds dismiss liquidity concerns.

Similar to Mr Brycki, senator Andrew Bragg has slammed funds for overextending into illiquid assets ahead of the crisis, calling it a “sign of bad management and poor investment governance”.

The raid is set to commence on 20 April, when the ATO will tell funds which members have been approved and direct their payments.

As at the start of this week, 361,000 Australians had applied for the early super release.