Trustees at funds like AustralianSuper have cashed up via their funds’ default option, at others such as AGEST members have cashed up themselves, but either way the chaotic markets are having a profound effect on investment mandates.

The chief executive of the $29 billion AustralianSuper, Ian Silk, said at an Australian Institute of Superannuation Trustees luncheon in Sydney last week that his fund’s total equities exposure had slipped from 60 per cent to 50 per cent over the past year, as trustees directed almost all of the net $3 billion of new inflows to cash.

However Silk reported that member traffic toward cash-heavy conservative investment choice options had not noticeably increased in the recent tumultuous days, and nor had call centre volumes.

The chief executive of the $3 billion Australian Government Employees Super Trust (AGEST), Michael Seton, said the amount of cash in his fund had leapt from $100 million to $500 million in the past year, driven entirely by member switching. However he said this build-up had been gradual rather than a knee-jerk reaction following the ‘Meltdown Monday’ of September 15, and that most of the cash was held by the fund’s pensioners.

AGEST has recently contacted some of its managers requesting they liquidate portions of their mandates, both to accommodate the switches and allow it to meet calls on its burgeoning private equity program. However Seton said this was "business as usual" for the fund, which has long had one of the industry’s highest proportions of members not in the default option – about one-third.

"There’s nothing necessarily wrong with switching to cash. Outside of super, our members might have an Australian equities portfolio, and a house, so they can switch [to the cash option] and retain a balanced portfolio overall," he said. Seton expected that due to the likelihood of a "prolonged" downturn in the global economy, the fund’s cash levels would not reduce much over the next two years.

The $5 billion Auscoal said it had seen a doubling of switching requests since July, but that many members were viewing the current markets as a buying opportunity.

For example, a spokeswoman said that of the switching requests processed by Auscoal on September 24, 41 per cent were to the cash option, and 25 per cent to the all-bonds option, but that 17 per cent had been either to the Aggressive (100 per cent growth assets) or Growth (80 per cent growth assets) options.

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