AustralianSuper slashes value of unlisted assets

AustralianSuper first to cut value of unlisted assets like toll roads and airports, as funds face threat of liquidity squeeze.

AustralianSuper CEO Ian Silk. Picture: Britta Campion

The nation’s biggest superannuation fund, AustralianSuper, is first out of the gates slashing the value of its unlisted assets portfolio, which includes toll roads, airports and infrastructure, by 7.5 per cent, reducing the main balanced option by 2.2pc.

It comes as the nation’s super funds stare down the threat of a squeeze on liquidity as the government allows sacked workers to access up to $20,000 worth of savings over two years, and as members rush to switch their money into safer assets such as cash options.

Each super fund across Australia is currently reviewing the value of their unlisted assets, generally done on a quarterly basis, in order for the private equity investments, property, ports, toll roads and airport holdings on investment books to reflect their actual value.

About 90 per cent of AustralianSuper’s unlisted assets are valued by an independent valuer on a quarterly basis.

AustralianSuper, which had about $180 billion in funds under management before the COVID-19 crisis, carries most of its members in the flagship $130bn balanced option.

“In the current unique circumstances, AustralianSuper has moved to revalue its unlisted assets so that members can have an up-to-date picture of their superannuation balances,” AustralianSuper chief executive Ian Silk said.

“The values of all investment portfolios have been adjusted to reflect the economic and financial market impacts of COVID-19,” Mr Silk said.

“The valuations reflect all the available information at the current time. The fund will continue to constantly monitor the outlook and ensure valuations remain fair,” he said.

Unlisted assets are believed to make up about 20 per cent of AutralianSuper’s overall assets, and include toll roads such as WestConnex, Port Kembla and Port Botany, Ausgrid, Indiana toll road, Brisbane Airport, Perth Airport and Vienna Airport.

Unlisted assets have delivered outsized returns over the last decade as investors are rewarded for holding “illiquid” assets that are difficult to sell out of at short notice.

The $750 billion not-for-profit industry fund sector has derived a great deal of its outperformance, compared to the bank-run retail sector, thanks to its propensity to invest in unlisted assets.

The union-and-employer-backed industry fund vehicle IFM Investors, which owns a range of infrastructure assets across the globe, is also expected to mark-to-market its portfolio over coming weeks to reflect the damage wrought by the coronavirus crisis and the economic damage inflicted as governments seek to limit the spread of COVID-19.

While AustralianSuper’s balanced option has declined almost 10 per cent over the year so far, it has delivered a strong 9.5 per cent annual return over the last decade.

The superannuation sector has welcomed moves to open up nest eggs for workers experiencing hardship, but industry lobby groups have expressed dismay that they were not consulted on the plan and have raised concerns the proposal could increase liquidity issues faced by the sector.