AustralianSuper makes a monster investment loss
Today I would like to share with you an information that unless you read financial papers and follow all financial news, you most likely would not hear about it.
Somehow the mainstream press is staying away from this topic that involves lots and lots of investors that have their retirement savings with AustralianSuper.
For disclosure, I have included links to articles from Financial Standards and Finance Yahoo, Australian Financial Review that explain in more detail investment plans of AustralianSuper and the risk the super fund is taking with members superannuation money (see links below the post)
Therefore, if you are a member of AustralianSuper, listen closely as this video is about your savings, and if you are not with this fund, check if your super fund is involved in similar investment activities.
So what is that big story about AustralianSuper.
AustralianSuper is known to be investing a sizable part of the fund balance into what is called private equity.
Therefore, those are all unlisted markets and AustralianSuper is one of the biggest investors of all super funds to invest money into venture capital industry.
The head of international equities and private equity Mark Hargraves told the Financial Review and I quote:
“AustralianSuper remains strongly committed to private equity as it has been the top-performing asset class over five and 10 years for the fund, delivering 10 per cent and 12 per cent respectively for members.”
And then he goes into saying:
“The higher risk/return profile for private equity is a characteristic of the asset class, and we will continue to invest in private equity, venture capital and also the tech sector in general.”
Those are all beautiful words, but has AustralianSuper ever gone back to its members to explain the risk in participating in those investments? At the end of the day those are members funds, those are your retirement savings.
So what happens if that investment risk eventuates and there is a loss to be accepted.
This is exactly what happened. AustralianSuper invested heavily through Vista Equity Partners into Pluralsight the online learning platform only to now come out with the full capital loss of $1.1 billion.
I know that each super fund is trying to provide members with positive returns, but I would question if investing into an online education start-up is the safe and responsible way of investing other people’s hard earned retirement savings.
AustralianSuper blames COVID, more difficult economic conditions, rising interest rates, increase competition.
Those are the usual market changes that a good investment manager would take always into consideration and managed as required with due diligence and responsible governance.
And let’s be honest, how long can investment companies blame COVID? That was already years ago.
The loss of $1.1 billion is not reduction of asset value due to market conditions, this is the full write-off of total investment.
Imagine you invest $1MIl into a bank account and then one day your balance is $0. In AustralianSuper fund case this is $1.1bil of loss.
APRA was already investigating another super fund when investing into the private technology company Canva. There were no losses suffered and Canva exists and enjoys big popularity, so I wonder how AustralianSuper will explain this huge loss of $1.1bil to its members and to the regulator.
So why am I talking about this failure in my video? Why is this important to you?
First of all, regardless which super fund you are with, take ownership of your savings. Start asking questions how your money is invested. Request your fund to truly disclose the real risk that is taken with your savings.
At the end of the day, those are your retirement savings. Don’t just blindly accept the glossy advertising and words of promises.
As per statement made by the head of International Equities and private Equities in AustralianSuper:
“The higher risk/return profile for private equity is a characteristic of the asset class, and we will continue to invest in private equity, venture capital”
Your job now is to decide if you feel comfortable with this level of risk, are you comfortable with having your savings invested in start-up companies?
Ask all the questions, get your full answers and then you can proceed with your investment decisions based on the level of risk you feel comfortable to take.
But at least you will be equipped with the knowledge, and it will be your decision to participate or not in such investments.
Links to articles:
Finance Yahoo
Australian Standard
Financial Review (AFR)
By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement
