Increased member engagement with superannuation funds and the improved efficiency of transferring money could combine to disastrous effect in the face of another GFC-like event, a leading superannuation researcher has cautioned.

Several factors have changed since the GFC, including the introduction of SuperStream and the rise of mobile-enabled websites, enabling the behavioural bias of members to rapidly impact asset allocations, warned David Haynes, executive manager of policy and research at the Australian Institute of Superannuation Trustees (AIST).

These biases could lead to a significant liquidity mismatch, particularly if members panic and shift their money to conservative investment options or even out of the super fund entirely.

“On the one hand you have a system that is increasingly facilitating the flow of money [and therefore the need for liquidity], including changes initiated by members, but on the other hand you have an asset allocation model that is increasingly conscious of the opportunities for outperformance in relation to areas such as private equities and infrastructure, where you have less liquidity,” Haynes said.

He added in 2008, while most people had computers and phones, the extent of decisions made through a super fund’s website was far lower than now. This was partly because of the lag caused by communicating with members via annual statements.

During the GFC only 2 to 5 per cent of money in super funds was moved to a more conservative investment option or to another fund.

“That was probably in the member’s best interest because crystallising your losses at the bottom of the market is intuitively what a lot of people do,” Haynes said.

Today’s advances means member initiated changes, which previously could take five months, can now be completed in five minutes.

“For myself, it would be absolutely the wrong outcome if superannuation funds were restricted in their ability to pursue high performing assets such as private equity and infrastructure, simply because of a fear in the event of a downturn everyone will run to the other side of the ship and cause instability in the system,” Haynes said.

He added the impact of new and emerging technologies on member behaviour during market downturns is largely untested.

Because of this he urged super funds to do stress testing to find out how members might behave in that scenario, as well as recommending structural protections to ensure that people can continue to invest in longer term asset.

“I would hate us to be responding to that issue after the event, rather than responding proactively,” he said.

Another part of the solution is providing advice to members in a market downturn – a strategy some super funds have already been employing with the market volatility over the past two months – explaining the advantages of not panicking and crystallising losses.

“The message I want to make clear is super funds and members derive benefit from alternative investments. Changes to the structure of superannuation, brought about by SuperStream technology, whether intended or not, need to allow the recognition of the importance of being able to invest in alternate assets,” he said.