Last week I asked some tough questions and expectedly received some passionate responses.
Let me begin by clarifying the question I asked last week: “Where’s the Leadership?” It was ultimately a question to the broader group: super funds, industry bodies, regulators and government.
As CEO of an event and publishing firm, I am facing my own share of leadership challenges. How we communicate, seek feedback and collaborate defines how this industry pulls through its own version of this crisis.
I also want to clarify the important role media has to play in a crisis. Our responsibility is to make a difference by identifying important issues, providing information, analysis and opinion, and campaigning where we see a worthy cause.
It is not about generating readership using hyperbole which could generate systemic risk. It is sometimes a fine line to tread. Some questions will make people feel uncomfortable.
My apologies if anyone interpreted my article to be critical of Hostplus or REST. They are simply the most obvious examples of funds which have been adversely impacted by a hastily made policy decision. With young membership cohorts, allocating to growth assets and private assets appeared an appropriate long-term investment strategy.
I was questioning the leadership which led to this situation: how much consultation was there between government and APRA, between government and industry bodies, or between government and industry participants? Could greater consultation have produced an outcome which didn’t create an unnecessary flow-on effect? Consider this: many super funds run up to 50 different liquidity stress tests, and the results are reviewed by APRA. Shouldn’t consultation have been appropriate? There may have been other solutions. This is a question I’ll be asking Senator Jane Hume at our virtual Retirement Conference tomorrow.
How challenged are the liquidity positions of super funds? It’s a complex issue. David Bell, executive director at The Conexus Institute, wrote an overview piece on the liquidity, pricing and equity challenges faced by asset owners. We’ve also reported on the liquidity challenges in fixed income markets. And this week you will see us provide updates from a spectrum of super funds.
Additional stimulus is forthcoming and superannuation will almost certainly be tapped again. In this situation, what represents good leadership? Surely more than lobbying to protect vested interests or one sector of super trying to score points against one another. Strong leadership is collaborating to develop a range of possible solutions, assessing the benefits to consumers and challenges created for superannuation funds. Regardless, in this environment, sensible liquidity risk analysis would mean that every fund should be considering the scenario of a superannuation guarantee freeze.
The one thing I’m certain of is that many more challenges will arise. We’ll be playing our part in making a difference for the industry and its members.