"If you assume that industry funds were doing the same, they should have foreseen an increase in members switching to cash and wanting early redemptions. The trustees of some super funds now face a dilemma: how to go about valuing the huge swathes of illiquid assets the funds hold without spooking fund members. Elcid Investments is a highly illiquid stock with hardly any trades -- the share has changed hands only 31 times since July 2011--on the exchange. "[Unisuper, which has $85 billion in funds under management, called for an The banker says any liquidity pressures are likely to be temporary because super funds will continue to see cash inflows from people who remain in employment, and who'll continue to make their regular super contributions.But another eminent banker is reluctant to pledge support for super funds struggling with a lack of liquidity. They have a right to move that money to another fund at any time. Illiquid assets are assets which cannot be easily converted to cash. How do they look ALL their members in the eye and say they did the right thing by EACH of them? They take longer to trade or find buyers willing to transact at a given price. I am not suggesting that unlisted asset prices need to match those listed falls, but the current gap across some areas is stark.Investors may therefore be totally rational in desiring to withdraw or switch from such investment options even if one is agnostic on the near-term direction of listed markets from here.This is not to deny that large super funds hold some high-quality unlisted assets that will deliver attractive long-term returns, even from current valuations and especially if interest rates remain low. On the one hand large, near term downward adjustments (including some sales at lower prices) will move valuations closer to the levels implied by the pain in listed assets and theoretically, should discourage some switching and withdrawals. "This means the trustees of industry super funds will face another huge dilemma: how to handle the mark to market of their illiquid assets.Major super funds – including AustralianSuper, Cbus, and Unisuper – have already downgraded the value of their stakes in illiquid assets, such as airports, ports, toll roads and property.AustralianSuper has wiped 7.5 per cent off the value of its unlisted infrastructure and property holdings, while Unisuper has cut 10 per cent off the value of its unlisted property, and 6 per cent off unlisted infrastructure.Meanwhile, Hostplus – the industry super fund for the hospitality and tourism sectors – has cut the values of its property and infrastructure investments by between 7.5 per cent and 10 per cent, and its private equity and venture capital investments by an average of 15 per cent.But bankers point out that further write-downs in the value of illiquid assets could be necessary to bring them close to market values. IOOF's MySuper fund is 15 per cent invested in illiquid assets, Mr Mota said, compared to 36.8 per cent for industry fund Hostplus's flagship balanced fund. Cross member subsidisation must have occurred and people’s retirements damaged by the actions of the trustees. They didn’t buy such assets during the crisis but they simply didn’t revalue them while the sharemarket dropped by 50%.Professional Planner is the leading voice for financial planners where they can learn about industry standards, get news, information, debate and develop new ideas.© 2020 Conexus Financial. “If, for example, a pension scheme with assets of €500m invests only 10% in illiquid alternatives, then direct investment becomes almost impossible,” says Brown. Good policy? Funds may place greater constraints on switching/redemptions, at least for investment options that hold illiquid assets. "It's more important for us to be in a position where we can provide funding to the real economy.

The low volatility and capital preservation “benefits” of many of these assets will be seen to be largely an illusion.The question for funds today is this – what is the real value of vast number of illiquid unlisted assets held (both directly and through institutional funds) by super and some managed funds? As a trustee you need to be cognisant of that.”Some super industry groups have been pushing for RBA liquidity support, but they say it's not because funds do not have sufficient assets to cover withdrawals but because they will have to sell assets at bargain prices.University of Melbourne finance professor Kevin Davis told the The prudential regulator sued IOOF and members of its executive leadership team, including former CEO Chris Kelaher and chairman George Venardos, for alleged breaches of superannuation trustee directors’ duties in the aftermath of the inquiry.Coronavirus: Need to know.

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