The Government was not particularly helpful to Weaven’s cause at the conference. Ramani Venkatramani, APRA’s general manager of specialised institutions (NSW) called for super funds to review their liquidity risk. He also mentioned the possibility of a run on a fund.And Nick Sherry, the Minister for Superannuation, said that he had spoken with APRA and ASIC about the issue and they would “keep a close eye on liquidity”.
So, where do we take an argument when the opposing sides are both correct? It has to be over to the researchers. What is needed is a new framework, supported by a strong body of academic literature, analysing the nature of risk and liquidity. A modern Portfolio Theory II, as it were. Weaven knows that super funds are only going to invest in ‘nation building’ projects if they get sufficient return for members. The new Trustee of the Year, HESTA chair Beth Mohle, said her co-directors focused on “members, members and members’. This is supported by legislation, in the form of the Sole Purpose Test within the SIS Act, as old as that now is.
Any research into the area would inevitably lead to questions about the role of the listed markets and their level of efficiency in providing capital for businesses or projects of any description. Listed markets, as they have functioned for more than 100 years through well-regulated exchanges which provide the mechanism for trading for the vast majority of investors, have come under competitive attack in recent years.
The so-called ‘dark pools’ of liquidity provided by large institutions such as index fund managers, transition managers and investment banks, make up an increasing proportion of institutional transactions around the world. In Europe, it is said, the dark pools account for a full 40 per cent of trades. If the ‘master manager’ concept takes off in Australia, which is being enthusiastically promoted by NAB Custody in particular, this would represent another dark pool, effectively being provided by Weaven’s constituents – not-for-profit super funds.
Another topic discussed at the conference which also goes to the role of super funds was the provision of products and services to members in their retirement. This is a big issue for funds because it is linked closely with the provision of advice. Most funds have recognised it is not in members’ interests to look after their money for 20 or more years, so far, and then at the crucial time of retirement simply say ‘goodbye and good luck’. So, they have developed their own allocated pensions as a start, although the take up by members has been miniscule from all accounts.
