The major risk faced by the manager is the movements of members. “We recognise that our liquidity risk arises from investors wanting their money back,” Tully says. The allure of cash to CFS clients has been strong. In its first few months of existence, its new cash product, FirstRate Saver, has pulled in more than $500 million. Frontier Investment Consulting also observes that the “modest trend” of member movement to conservative options has gathered pace in recent months, says Kristian Fok, deputy managing director with the consultancy.

These movements have affected the rebalancing activities of funds, but have also precipitated another gradual change in their liquidity profiles. Since the last major downturn, the asset bases of super funds have grown relative to their cashflows, Fok says. Larger member accounts now far outweigh the size of the contributions that feed them. “Assets can no longer be offset by cashflows,” Fok says.

As a result, member contributions relative to riskier holdings such as equities and alternatives will probably shrink in the near-to-medium term, due to the growing number of members choosing more conservative options and the small volume of contributions compared to total assets. Voluntary contributions are also predicted to diminish somewhat as the domestic recession puts more members out of work.

These are further dimensions of liquidity management that funds are dealing with. Facing up to these risks, super funds need to broaden their thinking about investment strategies and the liquidity that enables them, since investment assumptions, based on historical cash flows, have now changed for the foreseeable future. “You don’t want to be managing for liquidity only for now, but also in the future,” Fok says. As a pertinent starting point, currency hedging should be moved out of asset classes and carried out at the fund level, Rieck says: “You need to do these things in one place. Then there will be no people offsetting [hedging] trades, or trading with different brokers at different times.” Liquidity management also involves saving money wherever possible and deploying it effectively.

QIC began amassing its $10 billion hoard in the last two years of the bull market, “when we could, not when we had to,” Rieck says. Institutions can strengthen cash reserves by taking distributions from alternatives managers in cash and not as re-invested capital with the manager, by not leaving excess cash with futures dealers and custodians, and by engaging in securities lending and “repo finance” with bond managers. “None of this is new,” Rieck says. “We think of ourselves as a treasury division in a multinational corporation, because the tasks are similar to corporate finance. It involves jobs like finding out the costs of capital, funding trades, and hedging tax exposures.”