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.
Think Industry Fund Services should be made to update their TV ad (which no surprises we have not seen for a while now…) to say “Don’t let that greedy bank planner get their hands on your Industry super” to now say “We won’t let you get your hands on your Industry super either due to our liquidity issues…”
Memo to ASIC – Just make the Industry Funds true to label by calling their funds 100% growth 85% growth 70% growth and by the way infrastructure and property are growth assets not defensive so that should help members to better understand what these funds are actually doing with their money.
Compare that Pair! #nobailouts
Some very big liquidity issues will unsurprisingly emerge , lots of spin but watch this space
This was well overdue and industry funds should be held accountable . How the hell can you say that Hostplus’ flagship Default ‘Balanced’ Fund is a true representation of true portfolio (70%G-30%). For many years the Industry Funds have been gloating about their returns on compare the pair advertisements. Now it’s time for them to cop it on the chin and face the backlash!
What saddens me though is the loss of many members retirement funds overall.
Industry Funds need to treat members as Clients and offer more value.
Agree that the balanced isn’t balanced, but aren’t you going off script. I thought the main argument was the fact they had all unlisted investments.
as opposed to the overpriced retails funds? come on.
Want a pay rise , go work for an industry super fund. Staff are paid over the market, receive extra holidays and abouve the normal SG payment for super. Not for profit of shareholders maybe, but profit for those running them, not dissimilar in fact to the unions who are also not for profit and there for all members ….mmm
You honestly have no idea.
I feel so sorry for the advisers here that feel the need to gloat about potential trouble for one of their competitors. It shows to me we have a long way to go to make this a true profession.
While I recommend industry funds to my clients, I take the time to explain to them about risk and the fact that ones like Hostplus are not really balanced at all. We then work with them to get them into a portfolio that is more suited to their risk profile. Usually this is a mix of property, shares, bonds, and cash. They are mostly listed investments, but if it has some unlisted it doesn’t really worry me. I look for is what the actual asset is and steer clear of the industry alternative income investments (as in most cases they are growth assets).
If my clients have another 20 years to access their super, why do they need to see their investment revalued every day?
Over the past few weeks I have had a few conversations with my clients about the potential lack of liquidity of industry funds. They are comfortable that the risk of this (given they don’t need to withdraw their investment anyway) is nothing compared to the continued underperformance of like for like investments in retail funds.
Why do assets need to be valued every day? Ever heard of the term “Arbitrage”?
Well, in a market economy, the price signal arises and is adjusted from supply and demand. What is happening here is that the price signal is being “managed” which creates inefficiencies – they are that the investors don’t know what their assets are actually worth. That would be Semester 1, First Year Economics. Arbitrage arises when you can exploit price differences in goods and services in different markets. That’s not really relevant here as we can’t “sell” the Industry funds to close the arbitrage so investors would then know the true value of assets. You probably heard that word in a film once I am guessing.
Wrong guess! I am an economist…and your assumption that someone will simply hand over their non-industry funds to replace the cash withdrawn from the industry fund could also be wrong especially if nett withdrawals from the fund far exceed net income to the fund. Any investor removing their funds from the industry fund and then investing back into that asset class in the listed sector derives that arbitrage benefit. When this is done en masse those who remain in the industry fund believing their investments are worth 100% of the published value when its worth 50% will not be happy.
As an economist you would also know that this is not going to happen en masse and therefore is a mute point.
Do you review all of the assets held in Super by all of your clients and change them if there is a better option? Of course you don’t.
Next reason please.
If you have been recommending industry funds with high allocations of illiquid assets, what the hell are you doing wasting time writing on this website? Get on the phone to your clients NOW. You should be working 16 hour days and forget about Easter. Real financial advisers don’t work 9 to 5 during times like this. We step up to the plate and support our clients. Look at the numbers put forward by Chris Brycki and others. Don’t bury your head in the sand. Being a good adviser sometimes requires you to admit you were wrong, to apologise to clients and be honest when you have made a mistake. Most of your clients will understand, they know you are human and will thank you when this is over. They will also appreciate the late night phone call and the rushed SOA you get out to them because you want to protect their interests. Best of luck.
I find it laughable/sad that you have the arrogance to tell me how I should be running my business and managing my clients, solely on the basis of the fact I recommend industry funds.
For your info, my clients are happy with the service and advice I provide. I keep in touch with them regularly and not one of them is panicking or worried about their investments. I also believe they will be better off in 10 years time when they retire. Also, I don’t need to be working 16 hours a day. If you are that is probably a reflection of your business not mine.
Also why would I look at the numbers put forward by Chris. He is just another person with a vested interest who uses data (he put together himself) to claim that his underperforming investments are better after all.
I get this feeling that you don’t really understand what the problem is, but are just focused on saying “industry funds are bad”.
Happy Easter and try and be a bit more positive hey.
I agree. Get on the phone now and admit you made a mistake advising clients to go into Industry Funds. The quicker you do this the better !
Quick the sky is falling. My money is on industry funds once again coming through this with better returns than your retail funds.
Even if your clients dont retire for 10 to 20 years, the fact that other members are drawing out cash and forcing sale of growth assets at a poor time in the market is still concerning. I’m wondering what lies you tell your clients for not a single one to be concerned at the moment
If u are so transparent who go as anonymous
How much energy is being put into protecting this PONZI if it’s not a problem then let members have the cash without the need for the fund to require a loan or a bail out then the argument can be settled once and for all.
Is it a Ponzi, or is it that they are invested in unlisted assets, or is it that half their members are going to leave them, or is it that the fund holds no cash, or is it the barefoot investors fault. This is a bit like choose your own adventure where no-one really knows what they are arguing, except to say industry funds are bad.
Waiting for a comment from Scott Pape and his unofficial advice that somehow escapes being caught up with SOA, BID, FASEA Code etc etc
??
Hahahaha….Scott Pape……the “barefaced investor”.
General, unofficial, not directed toward you, generic, not personal, commentary only, sell a lot of crap books advice.
What a wanker…..and all the wanker commercial media outlets that facilitate his existence by allowing his comments.
Why don’t you wander around around your farm in your bare feet where I’m sure you will step in something that resembles the ” general advice” you dish out.
This type of person is no different to Paul Clitheroe, Darryl Dixon and the rest of them who have graced late night ABC Radio programs where often the host also chips in with a few “advice” comments of their own along the way so their listeners can get a big dose of general advice all at once, even from the presenter (hello Tony Delroy ?).
Paul Clitheroe and Darryl Dixon use to only ” help” people of course…..no advice…just “helping”.
The emperor truly does have no clothes. I am waiting with Bated breath to see how the industry (union controlled) funds are dealt with in a post Covid19 world. I suspect it may not be a severe as it needs be, but let’s all hope.
Then why did Ian Silk ask for liquidity assistance for industry funds ?!
Maintenance of that epic, British colonial era moustache doesn’t come cheap mate.
HAHAHAHAHAHAHA
I was thinking more Village People.
I needed that laugh
Because Silk smells ‘free money’ on the same level that a shark smells blood in the water from miles away.
What a disgrace. Only 7-10%? Why is there no Commercial or Residential sales happening right now? Its because like other listed infrastructure investments, values have fallen much, much greater than 10%. Seriously. Try to sell a shopping centre or premium office building now at January prices less 10%.
Why should it reflect a firesale value? Will every managed fund that invests in infrastructure/property be reporting their NTA as zero? If their investments still generate an income (alot are in either utilities or offices leased to the Government) why should their underlying value really change.
They don’t need to sell them, the same as scentre is having a firesale now. Just because their shareholders have bailed doesn’t really change the underlying asset value.
This is superannuation. The assets reflect what the members are invested in. They will need to make sales. Refer to MTAA Super in the GFC.
The matter is “directed by the ATO”.
End of case.
Pay up.
be careful… the spin machine might be going into overload. Perhaps this sage should be included in the compare the pair ads!
If the FSC weren’t b*lls deep in bed with industry fund mandates, they’d be smart to pool resources and run those ads themselves. Pity we don’t have CEO’s of the banks and large insto’s like the ones in the mid-90’s who loved the brawling and ‘attack is best form of defence’ strategies. Now they’re all politically correct bean counters.
There is a very simple option for the affected funds, revalue unlisted assets to current values for listed equivalents and then all members will get a fair outcome, those withdrawing and those remaining. I wonder though whether there is a reluctance to revalue unlisted assets to levels being experienced by listed assets (which are possibly lower), because the fund returns get hit more and their marketing edge (higher returns) is lost? .
Could another reason be that the funds get paid based on the size of the investment? By revaluing down they take a pay cut. Nah…industry funds aren’t shady at all.
Too bad for clients risk profiles! If you are forced to sell all the defensive assets like cash you are ramping up the growth assets. If you refuse to sell down liquid listed share holdings you are also ramping up the growth assets. The industry funds are significantly shifting these so called “balanced” portfolios to “high risk”. Then again Industry super funds never really were “balanced” that’s just a marketing term 😉
Yep even the recent Government APRA heat map had Hostplus “Balanced Fund” at 93% Risky Growth Assets.
Imagine a Financial Adviser putting all their “Balanced risk profile investors” into 93% Growth assets.
Instant ASIC dismissal and likely gaol time.
But what did APRA, ASIC or any other Government body do about Hostplus ??? Yep Nothing of course they are an Industry Fund.
Basis for recommendation to switch out is inappropriate labelling wrt asset allocation and associated concerns around future liquidity.
Yep, absolutely.
well said
Well pointed
And then you see Advisers getting hit with penalties from ASIC, and in some cases losing their careers due to the fact a Balanced-to-Growth client was recommended 75% or thereabouts growth assets. The client didn’t proceed though ended up investing into an Industry Fund’s “Balanced” option with 93% Growth assets. They didn’t complain but they just didn’t go ahead. ASIC’s view from a review of the Adviser’s file? The 75% allocation was overweight and posed significant risks, whereas due to the Industry Fund’s name being “Balanced” it was more suitably matched to the client’s risk profile. Therefore the Adviser must not have the experience, knowledge nor training to provide financial advice and posed a risk to the general public.
Wow. Now compare the pair! One fund you can get access to your money but an industry fund delays or restricts you. All their bullshit advertising and government support irrelevant if you cannot access funds when you need it most. Time to turn up the heat on these funds
heat, no it needs to be blow torch. compare that ass holes