Unlisted asset devaluations could reverse industry fund 'performance differential'
A continued resurgence in listed markets could result in further downward revaluations in unlisted assets and a consequent narrowing or reverse of the favourable performance differential held by industry funds over retail master trusts, according to Chant West.
Principal Warren Chant said many industry funds had increased their exposure to unlisted assets — notably property and infrastructure — in the past three years, these “being the place to be in 2008-09”.
However, he said while this strategy has “generally served their members well, there are now concerns that in some cases the pendulum may have swung too far".
“We believe that liquidity issues with unlisted assets is why master trusts have been too wary of unlisted assets, while some industry funds could possibly have gone too far in that direction.”
The Chant West growth survey found that the range of exposures to unlisted assets is 0 per cent to 23 per cent among master trusts and 14.5 per cent to 42 per cent among industry funds.
“There are also other industry funds that are not in our growth survey that have as much as 70 per cent in unlisted assets, and we classify that as a high growth investment.
“Those higher end exposures are well above our suggested maximum, and for a fund to go that far is a big call to make in our view,” he said.
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