Early super scheme ‘hurt’ Hostplus’ returns

The $48bn Hostplus posted a negative return on its balanced option for the 12 months through June.

Hostplus super CEO David Elia: Hostplus’ long-term results continue to be well above both our strategic target return and the results of most peer funds . Picture: Alex Coppel.

Hostplus chief executive David Elia has partly blamed the federal government’s early super access scheme for the fund’s first negative annual return since the global financial crisis, saying it was forced to hold larger amounts of short-term liquidity to pay out members hard hit by the coronavirus crisis.

The $48bn Hostplus posted a -1.74 per cent return on its balanced option for the 12 months through June, well below the top performing fund, Suncorp’s multi-manager growth fund, which returned 3.8 per cent, and below even the median return of -1.2 per cent, according to data from research house SuperRatings.

It comes as Hostplus revealed early super access requests spiked in the first few days of the new financial year, with the industry super fund paying out close to half a billion dollars to members between July 5 and July 12.

Over the seven-day period, Hostplus paid out $480m on 56,331 early super access requests.

The second tranche of the scheme opened on July 1 and payments generally take between three and five business days to process, meaning the latest data from the fund reflects the surge in requests the tax office reported on July 1.

Hostplus has so far paid out $2.17bn to more than 300,000 members since the scheme began in April.

Across the sector, super funds paid out $19.1bn on 2.7 million accounts up to July 5, according to the APRA. A surge of second-tranche applications is expected to be reflected in the prudential regulator’s weekly numbers due out in the coming days.

“This single-year return has largely been as a result of unprecedented investment market conditions and our need to carry higher levels of short-term liquidity than would otherwise be the case in order to support the federal government’s Early Release of Superannuation scheme,” Mr Elia said on Saturday.

“We remain highly confident that our investment strategy and beliefs remain sound, and while we have recently made some modest adjustments to our strategic asset allocation ranges, we believe these changes will contribute to maximising our longer-term risk-adjusted returns,” Mr Elia said.

Mr Elia in May warned that the early access scheme would hurt member returns by forcing funds to hold more cash.

The fund in early April bolstered its cash reserves in preparation for the flood of early access requests, lifting its reserves from $2bn to $6bn in the space of a few days.

In June, it increased its allocation to cash in its default balanced option from zero to 5 per cent and slashed its alternatives allocation from 8 per cent to 5 per cent.

“While no one likes any negative return in a given year, this is the first time in 11 years that our balanced option has delivered such a return, the last time being during the global financial crisis. This is only the fourth negative return in Hostplus’ 32-year history,” Mr Elia said.

“Hostplus’ long-term results nevertheless continue to be well above both our strategic target return and the results of most peer funds over these periods.”

Over a 10-year period, Hostplus’ balanced option has returned 8.6 per cent, coming in just behind AustralianSuper’s 8.8 per cent and UniSuper’s 8.7 per cent.

“While long-term superior performance is not a guarantee of future performance, our proven track record does provide us with confidence that our strategic and diversified investment strategy will successfully overcome periods of short-term economic volatility and fulfil the long-term retirement objectives of our members,” Mr Elia said.

The fund has been one of the hardest hit funds from the government’s emergency super access scheme, with its members among those most affected by the coronavirus-induced economic shutdown. It is committed to supporting its members through the crisis, Mr Elia said.

“Our focus is, and always has been, building long-term wealth and financial security for our members, and our investments are focused on the long-term goal of assisting all our members to enjoy a dignified retirement.”