The Stevedoring Employees Retirement Fund (SERF) has seen members switch nearly 20 per cent of its FUM from growth options to cash-heavy options in recent months, prompting changes in mandates and asset allocation.
The chief executive of SERF, Peter Robertson, said the $1.8 billion fund’s lack of a traditional ‘balanced’ option – its three choices range from a 90:10 aggressive:defensive ‘growth’ option to a 30:70 ‘capital stable’ option and a 0:100 ‘capital protected’ option – might have contributed to the high level of switching traffic towards cash.
SERF’s soon-to-be merger partner, the $1.1 billion Seafarers Retirement Fund, offers a balanced option around the conventional 70:30 asset allocation, and has experienced only an 8 per cent move from its growth option to its enhanced cash option since the global financial crisis began dominating headlines.
Robertson said that SERF’s exposure to illiquids was now above 30 per cent, and it had informed its manager, Quentin Ayers, that it would be receiving no more cashflow for the time being. SERF’s 25 per cent target allocation to illiquids has been reduced to 21 per cent, he added.
The manager rationalisation program being conducted in the lead-up to the SERF-SRF merger, which will create Maritime Super from January 1 next year, had also helped digest the run on cash.
"There was one equity manager which we decided didn’t fit with our strategy going forward, we’ve been able to redeem that mandate and use it to help meet the cash demand," Robertson said, declining to name the equity manager involved.
Robertson said that some of the switching to cash had been "reactionary", following the mailing of statements in early September showing a 10 per cent loss for the ‘growth option’, and the shock of ‘Meltdown Monday’ on Wall Street a few days later.
However he said a good deal of the switching occurred before then, leading him to feel confident it was "tactical" and would be switched back to a more appropriate risk level once markets settled down. (Maritime Super will offer a version of SRF’s balanced option from January 1, as well as the SERF growth option).
Roberston said SERF’s call centre volumes had increased 40 per cent from April onwards, reinforcing that its members’ high average account balances made them very knowledgeable and engaged with their super. He highlighted the "vast majority" of member monies remained invested in the growth option.