Hundreds of millions of dollars have flowed into Maritime Super’s managed volatility process (MVP) since launch nine months ago.
The overlay, which uses the shorting of futures options as insurance against falls in the value of equities, has been communicated to members with the words “don’t jump ship”.
It provides members with the opportunity to stay invested in growth assets with a reduced exposure of investment risks, at a 0.25 per cent charge.
The intention is to avoid a repeat of the GFC when some members sold out of equities at the bottom of the market and then bought back in at higher valuations.
Peter Robertson, chief executive of Maritime Super, would not disclose the full take up figures, but described it as “far exceeding our expectations” and that it was north of 100 members and totaling several hundred million dollars in coverage – the fund has 30,000 members with $4.5 billion in assets.
He contrasted the success of the product, with the low take-up of retirement products launched in the last two years by other super funds.
He said such products were trying to be all things to all people, while the MVP could be used across multiple fund options for those pre and post retirement. It is even being used on legacy defined benefit funds at Maritime Super as a liability management strategy.
Take-up has been high across members aged 50 and above.
“We thought initially it would be those close to or in retirement who would take it up, but it also appeals to younger members,” said Robertson. “Those in their 50s want to invest in products with exposure to growth assets without the extreme highs and lows that can accompany such investment options. They want to set and forget.”
Robertson said the fund has been searching for a solution such as MVP for several years, but had been put off by other solutions due to the complexity or the difficulty in explaining them to members.
Maritime Super’s financial planners have helped members interested in the details of how futures contracts work, but Robertson said overall member communications have been a “reasonably simple and straightforward”.
He admitted, that the full worth of the program was yet to be tested, as equity markets had only minor volatility since launch. “The proof will be in the pudding if we ever see a major market downturn,” he said, adding that he would preferably see no market downturn at all, than see the product be successful in such a downturn.
The futures overlay is managed by Milliman for Martime Super. Milliman manages similar programs for 55 institutional funds worldwide, the majority in the US and the UK.