APRA has asked super funds to report any exposure to the collapsed Silicon Valley Bank amid growing fears of a banking crisis as investors flee to safe-haven investments such as sovereign bonds, gold and the US dollar.
Investor nervousness this week shifted from the US to Europe after Swiss regulators overnight were forced to step in to underwrite liquidity to the beleaguered Credit Suisse.
The financial services regulator is hoping to limit any contagion effect from the deteriorating situation offshore.
“APRA continues to monitor the situation closely and is gathering information to fully understand the impact on Australian superannuation funds and their investments,” a spokesman told Investment Magazine.
In a report this week, ratings agency Moody’s noted that Australian banks “had stable funding and ample liquidity”.
SVB exposure
While Australian super funds are not expected to have had any deposits with the bank, the concern has been whether the funds had any exposure to companies which did have deposits with SVB or an exposure to the bank in any way and if this could impact on the value of their investments.
Several super funds are believed to have an exposure to Sydney based tech unicorn, Canva, which confirmed this week it had deposits with SVB.
Hospitality industry fund Hostplus is believed to have the biggest exposure to Canva and other tech and startup companies, through three venture capital funds – Blackbird Ventures, AirTree and Square Peg.
The fund’s spokesman declined to comment when contacted.
Initial concern about any exposure to the bank by Australian based tech companies eased this week with the US government saying it would fully back depositors in SVB and the collapsed Signature Bank.
But it will not back shareholders or bond holders in the bank.
Initial concern that the failure of the two banks could have implications for Australian banks has eased with commentators arguing that the problems were specific to each bank.
SVB had a heavy exposure to the US tech industry which has been hit by higher interest rates and pressure on earnings as a result of rising interest rates.
It was caught when it was forced to sell bonds, whose value had been hit by rising interest rates, to meet the increased in demand for cash from its tech-based companies as their earnings came under pressure.
Limited stake
Super funds’ exposure is small and appears to be largely confined to investments in tech-related companies held through private equity funds.
The $250 billion AustralianSuper said it had a $1.5 million exposure to SVB and Signature Bank through its Indexed Diversified Option.
“AustralianSuper is monitoring and assessing the US banking crisis and its impact on investment markets,” the fund’s spokesman said in an emailed statement.
The $150 billion Aware Super said it had “very small exposures to SVB and Signature Bank” which amounted to less than 0.003 per cent of total funds under management.
Aware said it had “assessed our private equity portfolio and determined that there were no identified material exposures where the collapse of SVB would impact the operations or solvency of our affected entities”.
“At a total portfolio level, the impact from the collapse of SVB is minimal.”
A spokesperson for the $110 billion UniSuper said the fund had a “very small indirect underlying exposure to SVB via private equity portfolios”.
“This is immaterial and we are working with our managers to determine the extent of the exposure.”
QIC’s spokesperson said neither it, nor the investment funds and trusts it manages, had any corporate bank accounts with SVB.
The fund manager said it had contacted all clients with a known exposure through underlying portfolio investments.
“These exposures are largely contained to privately held venture capital and growth investments,” she said.
“We have been able to verify, via our venture capital investment partners, that they can access deposits that were held at SVB.”
“This development significantly mitigates the risk of short-term losses and operational issues for SBV customers, but QIC continues to monitor the situation.”
Appetite for private equity holds up
The collapse of SVB has not deterred the likes of Aware and QIC from investing in private equity.
Aware has ambitions to grow its direct investing business internationally in private equity, infrastructure and property, CIO Damian Hill said in a recent interview.
“Private equity has played an important role in both adding diversification to our fund’s portfolio and generating strong risk adjusted returns for our members,” Aware’s spokesperson said.
“When pursuing opportunities in the technology sector, we conduct rigorous due diligence and apply strong governance principles to ensure our members’ financial interests are served and protected.”
“We will work with our external investment managers to adapt the operational arrangements they have with their underlying portfolio companies in light of the learnings from the SVB closure.”
QIC was similarly unshaken in its conviction in the asset class, saying it would “continue to consider and undertake robust due diligence on investment opportunities”.
