The top 300 superannuation funds are currently facing liquidity issues, according to Future Fund chair David Murray.
Speaking at a Financial Services Institute of Australia (Finsia) lunch yesterday, Murray said the fact that many institutional investors were not prepared to enter the debt market was symptomatic of the liquidity issues currently being faced.
"There is an issue and that's why in the debt markets a lot of institutional investors have not been as ready to invest as people thought they would be," Murray said.
"The issue arises because they have had some stresses on their liquidity from some unexpected causes."
Murray said that some superannuation funds had hedged their currency risk, and when the Australian dollar fell, they had to find liquidity to make those settlements.
He also said super funds were caught out as superannuation members began to exercise choice over their investment strategy.
"Superannuates have switched their allocation from balanced to cash which means that super funds have had to liquidate assets," Murray said.
According to Murray, super funds had also made commitments on a certain part of their asset allocations, which meant finding cash to cover those commitments.
Murray said that overseas sovereign wealth funds had experienced a similar situation.
"In a long-term fund, the cash relative to the total asset pool can be quite modest, so that has been a feature for many sovereign wealth funds around the world," he said.
"They've had to liquidate assets to move into their stabilisation role already."
