Revaluation of unlisted assets

March 24, 2020

The current market downturn is impacting the valuation of all investment assets. In response, AustralianSuper has revalued its unlisted asset portfolio.

For unlisted assets, which are typically valued by an independent valuer on a quarterly basis, the speed at which the COVID-19 pandemic has impacted global investment markets has meant that existing valuations were no longer reflective of market value.

In response, AustralianSuper has determined that it’s both necessary and prudent to revalue its unlisted asset portfolio. This action has been taken immediately to ensure these assets continue to be valued at fair market value and has been reflected in member balances for Friday 20 March 2020.

The revaluations have resulted in an average fall in the value of unlisted assets of approximately 7.5%. We believe that the size of the reduction in value is appropriate for each portfolio and is modest compared to the fall in listed equity markets.

For members in the Balanced option, this has resulted in a drop of approximately 2.2% in their account balance.

 

Valuing unlisted assets to ensure fair value

AustralianSuper has a long-standing track record of investing in unlisted assets both in Australia and across the globe. These assets have contributed to our history of strong long-term performance outcomes for members.

Whilst unlisted assets do not get priced daily on the share market, they are regularly valued by the Fund in accordance with the Fund’s Valuation Standard. Underpinning this approach is the use of independent valuations, with over 90% of our directly owned unlisted assets typically valued by an independent valuer on a quarterly basis.

In normal circumstances, this approach ensures that the Fund’s assets are held at ‘fair value’, which means that members’ balances accurately reflect the value of these assets; and member equity is maintained should some members choose to switch between investment options or exit the Fund.

In current circumstances, we’ve acted quickly to revalue these assets ensure that ‘fair value’ is maintained. The revised valuations reflect the Fund’s best current understanding of investment markets, considering valuation movements in relevant listed markets and the outlook for specific sectors and individual assets.

These revised valuations have already been reflected in members’ account balances as at 20 March 2020. We will continue to monitor investment markets closely to ensure that valuations remain fair and reflective of prevailing economic and market conditions.

 

Comparison of listed and unlisted asset returns

Unlisted assets, such as infrastructure, property, private equity and corporate debt, play an important role in a diversified portfolio as they are typically not as volatile as listed shares. In periods of strong economic growth, their values do not rise to the same extent as listed shares, and in downturns they do not typically fall to the same extent. The returns for unlisted infrastructure and property were less volatile in 2008 when the GFC had a major impact on listed equity returns.

The returns for unlisted infrastructure and property were less volatile in 2008 when the GFC had a major impact on listed equity returns.

Comparison of listed and unlisted asset returns

Benchmarks: Unlisted Infrastructure: AustralianSuper Infrastructure Benchmark (Frontier), Unlisted Property: MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index (post fee), Australian Shares: S&P/ASX 300 Index  

Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.


A message to members 

Whilst it’s concerning to see the deterioration in investment markets, we encourage members to remember that superannuation is a long-term investment. History suggests that by staying invested, and not switching between options, you are more likely to be better positioned to rebuild your balance over the long-term when markets rebound.

Consider your personal objectives, situation or needs before working out what is right for you.

 

READ MORE: POTENTIAL RISKS OF SWITCHING YOUR INVESTMENT OPTIONS


Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns. The case study is provided for illustration purposes only and isn’t a representation of the actual benefits that may be received or fees and costs that may be incurred.

This information may be general financial advice which doesn’t take into account your personal objectives, situation or needs. Before making a decision about AustralianSuper, you should think about your financial requirements and refer to the relevant Product Disclosure Statement available at australiansuper.com/pds. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.


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