MLC chief executive Geoff Lloyd said their fund had been raising liquidity in the market over the last few weeks as it prepares for the surge of hardship claims that are expected to hit 25,000 a month from new government measures that allow struggling Australians to tap up to $20,000 of their superannuation early.

Speaking at Investment Magazine & Professional Planner’s digital Retirement Conference, Lloyd said the retail fund had enough liquidity to manage the influx of claims that are usually around 1000 a month under existing provisions. Call volumes have jumped 60 per cent since the outbreak of the Coronavirus.

“We’ve taken (liquidity) from some of our defensive assets,” the CEO said. “Fixed income, for instance, we’ve drawn a little bit down. We have kept a good eye on asset allocation … we have to not just look after our clients who are taking that money out, we’ve equally got to look after those members and clients who are staying in the fund.”

Lloyd made his comments as stock markets around the world capped their worst quarterly performance since the crash of 1987, that prompted members across the industry to switch billions of dollars into cash. The government’s early release provision that allows people to withdraw up to $20,000 over two years has added further pressure on already stretched liquidity buffers.

 

 

The CEO said MLC funds went into the crisis with an asset allocation that was already “quite defensive,” with limited exposure to airports, property and infrastructure as a percentage of their total assets. He warned that some funds in the industry had been “very aggressive” in their allocations.

“We’ve seen large percentages of real assets in those portfolios and those assets are now illiquid,” he said. “They are going to have to work really hard to strike real values every day.”

Some of the larger industry funds have already revalued their unlisted assets. AustralianSuper said it had reduced the value of its illiquid assets by an average 7.5 per cent, while Cbus said they had seen “double-digit write-down” across parts of their unlisted portfolio including airports, private equity and retail property.

“If (funds) have gone into this market very aggressive with a lot of illiquid assets and ridden up the markets over the last decade without managing redemptions and (they) are a concentrated fund with one cohort of employees, then some of those funds are going to be in trouble no doubt,” he added.

 

Content from the 2020 Retirement Digital Conference is now available on our digital content hub, that includes the live stream video recording from each session, an exclusive podcast series, papers, speaker presentations and our editorial coverage of the event. To register for access to the hub, click here.

Sarah Jones is the deputy editor of Investment Magazine. She previously worked for Bloomberg News in London for more than 12 years covering equity markets and global asset management. Prior to moving to the UK, she worked for Australian Associated Press in Sydney covering economics and monetary policy.
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