The Australian superannuation industry and successive governments had long been aware of the ageing population and were already planning for the impact of the change in demographics, the Association of Superannuation Funds of Australia (ASFA) said.
Supported by the Australian Prudential Regulation Authority's (APRA) research into investment in illiquid assets by large APRA-regulated superannuation funds, it is clear funds are managing their liquidity risk and those with the most illiquid assets have the least need to access the assets in a hurry.
APRA's "Risk and return of illiquid investments: A trade-off for superannuation funds offering transferable accounts", looks at investments in illiquid assets and the impact on portfolio performance. Illiquid assets include directly held property, unlisted property trusts, infrastructure investments, private equity and hedge funds.
The key findings of the research are that not-for-profit funds (corporate, industry and public sector funds) have a higher illiquid asset allocation on average, although there is a wide range in allocations among both retail and not-for-profit funds.
The research also found not-for-profit funds that allocated a greater proportion of their portfolios to illiquid assets were generally larger, had higher net cash inflows and had younger members - all factors that tended to reduce liquidity needs.
It found from September 2004 to June 2010, not-for-profit funds with more illiquid investments experienced higher risk-adjusted returns, which suggested they captured a return premium for investing in those assets.
The research focuses on 146 large superannuation funds with total assets of at least $200 million. These funds represent about three-quarters of the assets in APRA-regulated superannuation funds.
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