Hostplus’ balanced fund has a zero per cent strategic asset allocation to cash.
The fund has 1.1 million members. Many of them are young, with nearly 25 per cent below the age of 25 and only 13 per cent above the age of 50, so you can understand how allocating a third of the portfolio to property, infrastructure and private equity might have felt like a safe move. Well, guess what? Politicians have moved the goal posts, and the public is already alert.
We all have friends and family that have been impacted by the layoffs in the hospitality industry. It is one of the worst hit industries by the economic crisis triggered by the coronavirus, with hundreds of thousands of people losing their jobs and thousands potentially losing their businesses.
How can super funds be a safehaven for people right now?
The average member account balance for Hostplus is $37,000. If the average member takes up the government’s offer and withdraws the $20,000 over the next two years, the implications are massive. Think about the lost potential compounded savings for the member – Industry Super Australia says for a 20-year old it would mean at least $120,000 lost super in retirement. Think of the loss in member flows coming in the door, the lost future returns, the loss of the potential job creation and nation building of these assets. And, wakeup industry, think about the loss of jobs for you.
Hostplus has $53 billion in assets. Of its most liquid part of the portfolio, 22 per cent is allocated to Australian shares, 22 per cent to international shares and 8 per cent is invested in the emerging markets. Is it going to sell at the bottom of the market? Perhaps sell private equity on the secondary market? Either way, it doesn’t look good for members.
But let’s not pick on Hostplus alone.
REST has more than 2 million members. Their average balance is even worse – $27,000 – and only 13 per cent of their members are over the age of 50.
Are all the young retail workers in Australia who have lost their jobs going to withdraw $20,000 from their super? If they did, it would devastate the fund and it would devastate the future savings for a lot of Australians. It would probably devastate the industry, too.
This liquidity crisis will need to be resolved. It will have serious implications for the long-term viability of the superannuation system.
We all agree that imperilling the funds and insinuating that the trusts they manage can be raided for any reason that the government sees fit is no way to build confidence in the system. But we also need leadership from within the superannuation system too.
Trustees and staff of super funds have been entrusted with something big – the future savings of Australia’s people. So what do we now? We want to hear.
An earlier version of this article inferred questions regarding the leadership of Hostplus and REST with respective to their asset allocations and liquidity requirements for their member cohort. The previous title “Where is the leadership?” was intended to question the political framework and consultation with super funds in ensuring the best outcomes for members at the difficult and uncertain time.