Challenger Limited has confirmed the degree to which major superannuation funds have been rebalancing their portfolios in pursuit of liquidity.
At the same time as the Australian Prudential Regulation Authority (APRA) has confirmed its close watch on superannuation fund governance and liquidity through the COVID-19 crisis, Challenger acknowledged a significant hit on its Funds Management funds under management (FUM.
It reported a 10% decline in FUM for the quarter to $74.8 billion - a decrease of $8.1 billion
“FUM was impacted by the significant equity market sell-off as a result of Coronavirus and increased redemptions by superannuation funds seeking liquidity,” the Challenger market update said.
“The impact of the Coronavirus pandemic and market sell-off resulted in significant fund movements as large superannuation funds and other investors rebalanced their portfolios and sought liquidity,” the Challenger announcement to the Australian Securities Exchange (ASX) said. “For Fidante Partners in Australia this led to strong equity inflows of $0.6 billion hich were partially offset by lower margin fixed income outflows of $0.4 billion.”
Overall, Challenger reported third quarter results entailing total Life sales up 9% driven by strong Japanese and institutional sales, while total assets under management (AUM) were down 8% to $79 billion following the significant investment market sell-off in March.
Challenger reaffirmed its guidance for normalised net profit before tax to be between $500 million and $550 million in FY20.
It said this guidance reflected the impact of changes to Life’s investment portfolio and lower Funds Management earnings from lower funds under management following the equity market sell-off.