This resulted in the last assessment from a ratings agency stating that 28 per cent of HOSTPLUS‘portfolio was invested in illiquid assets. “It’s actually 38 per cent, going by our definition,” Sicilia says. The fund divides its cash holdings for three purposes. First, an ‘illiquid’ bucket is left untouched to fulfil existing commitments, such as benefit payments and slated allocations to unlisted asset managers. Second, a ‘contingency’ reserve is kept to meet tax and currency hedging contracts, and other obligations which can vary in size. Finally, a ‘liquid’ stash is used to make new investments.

HOSTPLUS recently ran its portfolio through four stress tests to understand its liquidity limits. The first scenario demanded 30 per cent of the fund’s assets be immediately redeemed; the second assumed that HOSTPLUS’ investment earnings dropped to zero within 12 months; the third saw contributions to the fund fall to zero; and in the fourth, all of the fund’s unlisted asset managers called for committed capital at once. Then it cranked up the pressure by creating a world in which all of these events happened simultaneously, and assumed its illiquid assets could not be sold. “And HOSTPLUS never becomes fully illiquid even in this perfect storm,” Sicilia says.

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