Michael Seton

There has been an unprecedented surge in the size of the cash option at public sector fund AGEST, from $70 million in 2007 to $800 million – or 26 per cent of the entire fund – at the end of June this year, however the scheme sees no need for an education campaign about the long-term prospects of cash.

The $3.3 billion public sector fund’s cash option rose from $70 million, or 3 per cent of total assets, at the end of June 2007 to $320 million (11 per cent) at the end of June 2008 and $800 million (26 per cent) at the end of June 2009. It has since fallen to 22 per cent.

The Australian Bureau of Statistics last week revealed super funds’ cash and deposits at the end of June were 6 per cent higher than at the end of March, suggesting members are switching out of balanced and growth options at the worst possible time.

Michael Seton, chief executive at AGEST (and FEAL’s latest fund executive of the year), said the huge jump in cash protected the fund against some of the market turmoil, and has seen its assets under management hit a record high of $3.3 billion, above its pre-GFC size of $3.2 billion.

““In many cases our members switched a long time ago, so you could argue they switched at the right time…It’s certainly a big increase but we have quite strong cash flow, our fund at the moment is at a record high in terms of assets in the fund,” he said.

“Most funds and organisations’ assets under management would be much lower than the peak in 2007 but our fund didn’t go down as much for a couple of reasons, one is we’ve got strong cash flow and also a lot of our money has gone into cash.

“In the year to June 2009 we had $800 million revenue come in, from contributions and rollovers et cetera, and we invested $520 million. For a fund that was $3 billion that’s a fair percentage, that’s why we’ve bounced back reasonably quickly.”

Seton said while around two thirds of the increase in the cash option was probably due to switching, he estimated one third was down to rollovers into the fund and salary sacrificing into cash. More than 20 per cent of AGEST’s assets are pension assets, he added.