Unlisted assets a better super barometer than listed shares
A superannuation ratings house is arguing commentators are getting it wrong when they claim unlisted assets held by superannuation funds are valued at artificially high levels.
The ratings house, Chant West, is claiming the opposite is often the case.
In an analysis revealing the degree to which superannuation fund returns have been dragged down by COVID-19 uncertainty and volatility, Chant West said it believed “unlisted valuations are generally a better representation of fair value than listed market valuations which are often influenced by investor sentiment.
“We know that listed markets tend to overshoot in good times and undershoot in bad times, so in a crisis this can drag prices down a lot further than where they should be. For example, Australian listed property prices fell 35% in March but has rebounded nearly 15% in April so far,” it said.
“In the current market crisis, many super funds invested in unlisted assets (both not-for-profit and retail) are acting responsibly by proactively conducting out-of-cycle revaluations – in other words bringing forward valuations for parts of their portfolios,” the Chant West analysis said.
“These revaluations have typically resulted in write-downs of between 6% and 10% for property and infrastructure and up to 15% for private equity. The reason those revaluations are not as dramatic as we’ve seen in listed markets is that the process is unemotional,” it said.
Dealing with the overall state of superannuation fund returns, the Chant West analysis said that the COVID-19 pandemic had served to bring a record bull run to end.
“This resulted in the median growth superannuation fund (61% to 80% in growth assets) falling 9% for the month and 10.1% for the quarter,” it said. “The return for the first nine months of the financial year also turned negative at -6.3%.”
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