Industry funds – Unlisted assets

I am a fan of many super fund options, but I can’t stress enough that it is now time to review your investment strategy because something is just not right.

For a long time it has been spoken about that the unlisted assets of these funds have had a potential issue and the Covid-19 crisis may well shed some light on the specifics. This problem has been amplified by the LNP’s early access scheme in which the ATO has already processed 456k applications totalling $3.8B…that’s a significant amount of money being removed from funds, so what have they done about it?

Industry funds have long claimed that unlisted assets smooth returns and they sure can if they want them to.

For HOSTPLUS’ Default Balanced option (where a majority of members are invested), since the market peak in February, their Balanced option has underperformed their 100% listed Balanced Indexed (BFI famed) option on every single day the market was up, 15 days in total.

Whilst you’d expect this to happen it seems like a crazy coincidence it happened on every single day, and suspicion is raised when the biggest differences occur on the larger market up days.

For example; the 3 biggest up days for the Indexed Balanced option were 4.36%, 4.22% & 3.79% where the unlisted exposed Balanced option returned 0.34%, -.52% & 1.41% respectively. Given the option is ~50% listed equities (they can’t confirm exactly) but didn’t benefit from these up days it could be assumed they devalued their unlisted exposures on the up days which is handy if your goal is to smooth returns.

As I mention I don’t mind industry funds and is usually wise to stay the course with any investment strategy however there are some interesting things going on within super funds ATM so could be worth looking into if occurring with your situation.