Welcome, everyone. And good morning to you all and thanks for joining us for our Sunsuper Webcast. Let me introduce myself. My name's Mark Stubbings. I've got the pleasure of being your host this morning. And this first webcast, we're actually going to look at a particular asset class, but it's part of a deeper a much broader series where we actually deep dive down into our asset classes. This webcast is designed for financial advisers, dealer groups and industry participants and is obviously tailored accordingly.
What are we trying to achieve? We're trying to achieve with this webcast series, an insight and an update into the various asset classes we have. We're looking to talk about the objectives, the constructions, the holdings in those various asset classes and obviously the performance. We are also trying to be very open and transparent in these very, very difficult times. Obviously, we are in unique times, so to play things with a straight bat is very important for advisers and also for their clients.
We're actually going to look across a number of asset classes over the intervening weeks. We'll look at infrastructure, private capital, alternative strategies. But we'll also look at our equity holdings, which obviously include our index options today. However, we're focusing on our property asset class. Let me give you a little bit of an idea of the agenda we're going to welcome very shortly head of private markets Mike Weaver, who will actually talk to us today. And first up, he's going to give a short presentation on the property asset class.
We've designed this so that although he frames up the conversation, the desire is to answer your questions, the audience, his questions. We've received number up and to up to this webcast and we're actually going to answer those. But we will be taking live questions during the broadcast. And we really hope that you participate and join in. Just a bit of housekeeping to help you with that. To submit questions, you click on. Click on this speech bubble bottom right of your screen.
I've got the pleasure to be with Wilberg today and Will sitting to my right, and he's going to create the questions. Just be aware there is a few second time delay between submitting and receiving. We'll try our best to answer as many as possible. If we can't answer them, we'd encourage you to touch base with the business development team and willing to endeavor to do that. We've got a legal disclaimer that I need to read through now. Obviously, the information presented today is general and doesn't take into account a person's personal financial situation and goals.
Let me now introduce our speaker today, Michael Weaver. Michael is head of private markets. He leads a team managing property, infrastructure and private capital. He's concerned with portfolio construction, investment research selection, ongoing reviews and reporting on the property portfolio, which is obviously part of his brief, has six billion dollars worth of investment in funds and direct assets in Australia and offshore. Little bit of Michael's pedigree. He's had 14 years at some super nine years prior to that with Mercer dealing with large corporate clients.
He's got a bachelor of business, a graduate student management and also a masters of applied finance and investment. So now I'll pass over to Michael Weaver. Michael. Thank you, Mark. And so on, slide five in, we have the asset class a little bit about the portfolio. So as I mentioned, as Mark mentioned, just out of six billion dollars is invested in the property asset class. And that makes up around eight and a half to ten and a half percent of the different diversified options that most of our members are invested in.
And we also have a property auction, which makes up a big portion of that as well. And what do we do with the unlisted property that we invest in early after sort of pure play property? What do I mean by that? I mean, one of the tangible assets, real buildings, shopping centers, office towers, industrial logistics sheds, other investments. We have such a self-storage residential for rent, even holiday parks and data centers. So a wide variety of assets.
We're after a real income that they generate. And so we don't do a lot of development. For example, we're not really that focused on capital gain. We expect capital gain over time. There is growth from these is portfolio. There's more around how much income can we have, the stability of those leases.
Moving on to the next slide. How do we go and invest in this asset class? We invest by partnering with great managers and that's both here and offshore. It is a diversified portfolio. I've got some numbers on that in a minute. Really, we look to partner with the best operators. We don't try and do everything ourselves. We're selecting what sort of assets that we want. He manages the best place to look after those those assets. And we also invest in both equity and into debt investments.
Debt investment make up about 15 percent of the portfolio. And we think there's an attractive risk return basis in some certain debt investments that we make equities around 85 percent of the portfolio.
But we have relatively low gearing or compared to some people who invest in large commercial property. It ends up being around 20 percent on average across that portfolio. So that that's a prudent level of gearing, despite how attractive low rates are in today's market. So what are we trying to achieve? We're trying to achieve long term outperformance of a mix of equities and bonds. That's where we take the money from. So we're after diversification away from equities and bonds.
So you have some growth. You'd have some income coming through and generate a lot higher than what about bonds or cash will offer you today. And we expect that premium over time generally called an illiquidity premium. We take money out of more listed liquid markets invested in unlisted than expected premium.
Then we also compare ourselves. You look at the bottom right of that slide six. They target outperformance. They get some unlisted peers. So different asset classes in both the U.S. and Europe have different benchmarks. So we can compare ourselves to two to make sure that we're getting great returns for our members. Under the next slide, the graph shows the chart shows a nice mix of the portfolio. So retail is around, it says. Twenty two percent of the portfolio of a large man in office, but also for rent residential.
So that's multifamily, some aged care assets, particularly in the US.
Quite a lot of multifamily over there, which is a bit like a big Meriton apartment, but it's only run by the one operator and it's only for rent. I don't sell off any of those underlying underlying units.
So it's quite a big asset class in the US. We've tried. Different people have tried to make it stop here in Australia and I think that'll occur over time. But it's still in a pretty, pretty early stage compared to the US where it's been established asset classes over 30 years. Industrial logistics assets and self-storage. And in other, we have our holiday parks and data centres, as well as some other assets, such as medical office. The next slide shows where we invest.
So a very large portion in Australia. But that 10 years ago we diversified offshore unnecessarily to get higher returns. Some people invest offshore for high returns. We looked at it as a way of reducing risk. We're a global investor. We have lots of assets offshore and the equity table oil on portfolio. Australia is a narrow market for. So you wouldn't be able to access things like the multi-family essential in some of the other asset classes in Australia or sectors abroad.
So we think going offshore, it's actually has been a creative two returns.
But that's not the primary reason why we invested offshore just under 10 percent in Europe and then Asia. While we've done a lot of research, there is really just the early stage. Only one percent expect that to increase over time. But Asia is generally more volatile market. Shorter term places doesn't give us the stability of income. So what we have there is industrial and logistics assets and we expect those to increase in them over time. Under the next slide, one of the questions we get asked a lot is why do you invest in unlisted property as opposed to listed property?
And how does unlisted generally perform compared to the listed property? And it's an ongoing discussion that we have with a lot of people. And really, it's basically that first reason why we invest in property to give that diversification away from equities and to get that pure buy property. It's a lot harder in the listed market. So there's some great listed companies, great management teams, great assets underneath. But sometimes it's really hard to get us to know exactly what you're going to earn over time, because they might have large development pipelines.
They might make some capital transactions, such as buying a competitor or using gearing to invest offshore. Just not exactly sure what you aren't necessarily going to get. Some of them had large funds management businesses that could be good businesses, but when there's a downturn that they get impacted more than that, if it was just pure property. And so that's one main reason.
The other reason is really demonstrated on this chart that they can be the listed market will value some of these companies more or less. And what the underlying asset value actually is because of the market sentiment and how equity markets are attractive in general. So you can see on the chart it can be up to 30 percent above 30 percent below what the underlying values actually are. And the underlying values of that, most of those businesses attract exactly the same way as what we have in the unlisted market.
The external valuation firms independently done on a regular basis, and that the market sentiment can drive at a bubble. So it's really those two main factors that made it hard for us to to allocate to to the listed market.
Mark was their mark, and if there's questions, we can start those now. Thanks, Michael. And that was a good presentation, very good grounding. Maybe I can start off with some questions that we've received up to now. So we've obviously had a bit of a chance to prepare some answers for. And then we'll dip into some of the live questions. So first up, COGAT 19. The whole situation just in the context of that. What has been the impact on unlisted property earnings and also valuations?
Michael? Yes. Thanks, Mark. Yes. As you said, did say yes. Obviously, a very hot topic right now and there's been a lot of press around what's going to be the impact on shopping centers, office buildings and things like that. So, you know, we've spent a lot of the last few months really digging deep into what those impacts are likely to be. It is quite sector specific. So, you know, starting with retail property, that's the obvious one, that when not a lot of those a lot of the retail shops decided to close because not many or barely anyone was coming to visit.
That has a big impact on earnings. The government has come out with a tenancy code of conduct. So most of the businesses, both landlords and tenants, are working through that to determine what's a fair sort of balance of, you know, the impact of Covid. But there's no doubt that that's the short term impact to earnings and could have implications over the medium to longer term as well, depending on how Australia and other countries that we invest in react and rebound from the impacts of Covid and office buildings are a little different.
It's very asset specific and tenant specific, similar to industrial and logistics parks.
The reason for that is you can have some long term tenants, stable businesses.
That's going to be very different to if you are having a development on spec and trying to, you know, trying to rent that out, or if you've just got an upcoming vacancy, you might have less certainty of being able to roll that over law or get the value that you thought this sort of income stream you thought you were going to get. And one of the the next slide that we have is a building that we were a couple of buildings that we own a part of alongside Mirvac and AMP that's called South Everleigh in Sydney, just the southern part of Sydney. What that is very there are two very large buildings in this small third building, and CBA is the major tenant there. It's a long term lease. Something like that. We fully expect to be less impacted on a valuation basis than something that is a very tall shopping centre or if you're building something on spec. So that's that's an interesting example. And in terms of the actual impact, it is to two valuations across the portfolio.
The average write down was about seven percent. We undertook a deep dive into each asset and sector across the portfolio during March. Once it was obvious instead that there would be impacts. And we think that across the portfolio the numbers are around seven percent down. Shopping centres were 12 and a half percent on average, and some office and industrial and other assets were less impacted. So things like multi-family, a small impact. We do expect to have some. So far there has been some downturn in earnings and in the short term, you expect that to be bouncing back as as Covid is is recovered or the rebound from Covid occurs over the next sort of six or 12 months in most areas.
And another investment we have got on the next slide is called Discovery Parks. They own over 60 parks around the country and also have marketing arrangement for another 200 parks. So full network. And this one's out of Rottnest Island in Western Australia. Beautiful park that I encourage you to go and visit sometime if you're ever out out in W.A. and that they had to shut a lot of their parks because of state government legislation might make sense to to to close those that had to be done except essential work is, et cetera.
But then they also had that's in the holiday park area. But then they also had mining parks and worked for state where they weren't. They weren't needing to close. Those are able to keep going. So definitely a short term impact on earnings. But then over the medium and longer term, we believe that there'll be a slower rebound in international travel, which should encourage more people to have a holiday at home. So jumping in the car and going for a holiday, it's more likely to occur probably over the next six or 12 months.
And other thing, price. And what are you saying? Bookings occur? I know that we're keen to. That's been fine being at home for a couple of months. But, yeah, the families came to go and have a holiday. So we're looking mining for October. So hopefully a lot of you out out there will also be able to find a nice park to go and have a nice family holiday. And maybe a pause there. I can come covered in more detail if you like, Mark.
Thanks, Michael. I got to say that. Picture Rottnest Island looks particularly attractive, but I might be second booking after you, my friend. Another question that some super classifies unlisted property as 50 percent growth, 50 percent defensive.
Does this still hold true? As a rule, given the impact to earnings that you've touched on? You look simple answers. We think it does. Look, that's a long term expectation over the medium to long term, you expect to have 50 percent growth, 50 percent defensive characteristics from the asset class. That's one of the reasons why we're funding it from equities and from and from bonds. And there's definitely a hit to earnings right now. But you do expect when there's a downturn in equities, you do expect some impact on the property asset class not to be immune.
Doesn't really make sense when you're looking for the long term asset. So and that that that short term impact on earnings will be, as I mentioned, quite sector specific as to how long that will occur for. And when we look through the cycle, we say, well, do we think that still holds true? This is a different cycle. Every cycles different people wouldn't have expected.
And when they expecting a downturn, you have a hit to earnings that don't really expect that half your retail shopping center is going to be closed.
So and as they open up and, you know, retailers work through how how that all how that will impact you will have more impact there than some of the other assets across the portfolio. It's going to be impacted anywhere near as much. And that's why you have a diversified portfolio so that you don't have all your eggs in one basket. No one can predict the future. We just have good estimates of what what's occurring in some of the assets of bill, good demographic trends behind them.
So the multi-family US, US is still expanding people. Yes. Some of the aged care assets that we that we have investments in holiday parks, even with tourism over time. So we think those demographic trends would be helpful. Excellent. Thank you, Michael. And Michael, we've talked about some say the adverse impacts of what's happening. But what are the opportunities in the market? Double barrel question, are transactions occurring?
Yeah, but look, realistically, most of the market is still dealing with the fallout. So it's been a huge shock. If you compare it back to the global financial crisis, it was there was a lot more leading up to that crisis where people were thinking, you know, could could something. How bad is it going to be? Whereas this was a far quicker an earlier shock. So people are dealing with their own businesses, their own households, families.
And then they're worrying about how they can how they can work out a different tenancy arrangements and issues like that.
And so there hasn't been a lot of transactions. A couple imposed, a couple of kids kept going. So some industrial and logistics processes. And we'd had a look at what the pricing was, pretty, pretty high. The whole market has been very high for those over the last couple of years. E-commerce has been very helpful. That's going to continue with retail being affected. Actually helpful for industrial logistics assets. And so some of those assets are going at similar, if not better, prices than what was happening prior to the crisis.
So there hasn't been enough time so far for sort of any real distress to come through the market. We think that might occur over the next six or twelve months. But we'll be dependent on how quickly markets rebound and economies and health systems in general rebound. So we'll be quite country specific, we expect. And thankfully, Australia's so far done very well at coping with the crisis.
Awesome. Thank you, Michael. And what do you think? Another double barreled question, so I'll hit you with both at once. What is the outlook from listed property? Has the future fundamentally changed? Look, I think so, starting with the first part. Look, the outlook as professional investors, we compare unlisted property to every other asset class we invest in. So we're taking money out of equities and bonds, but we don't. That's one decision.
But then we can invest in infrastructure assets or private equity or private debt. And there's a lot of different opportunities out there. So we look at unlisted property compared to those, and we believe that unlisted property will still remain attractive. Reasons are long term demographic trends are helpful for property. When you've got high quality assets in good locations, they will continue to be attractive for investors long term and be able to generate income streams. But it's also the relative attractiveness of equities and bonds.
The bond rate, the 10 year bond rate in Australia is still under one percent. Equities have rebounded from their lows, but there's still a bit of uncertainty around underlying earnings. So people are looking at those and saying, well, property still gives me good stability of income, much higher income than what I get from bonds or cash. And good opportunity for growth, maybe not huge growth, but at least good, attractive growth. So I think that's the property market in general.
Once you get into different assets within the property asset class I mentioned retail had been marked down more than the other asset classes and it was already under pressure beforehand. It'll be interesting to see how that sort of online trend and how quickly people come back to shopping centres and looking looking to invest. I know that there are different different views in the market on that as to what people are going to want to want to be doing. So, yeah, I think that's that's quite interesting.
Office working from home. Look, I spent a couple of months for us working from home. Most of the team is quite keen to come back to the office. Some are less so. I think there'll be more working from home and flexibility. But the death of the office has been talked about before, and I don't think this crisis will be that different. Obviously, the social distancing part of it, at least until there's a vaccine, will will make it a little bit more difficult in offices.
But the interconnectivity. Humans are social beings like relationships. It's it is easier dealing with people in a meeting room, reading the room than reading the zoom. So you do find that most people you talk to at least change come back to the office and have that interactivity? I think that's good. And then there's other assets that are less impacted or actually it's beneficial. So one on the next slide, we have data centers and investment in Switzerland, very long term investment, very long term tenant.
The major tenant is Microsoft is a large amount of tenants. Microsoft is the main one under long term contract and it's seeing increased demand for the data. So we invested in this over a year ago and something like that has good income, but also growth opportunities as it as it looks to looks to grow.
Thank you, Michael. So what I might do now, Michael, is pass over to Will, who's sitting off camera. And let's do some live questions from our audience today. So will you want to hit us with some of those plays?
Thanks, Mark. There's a number of questions coming through, so please do keep them coming. The first question for you, Michael, from Russell waiting is how how are your property investments held? Are they single property, direct ownership or multiple direct properties housed in an external trust or similar? And are they geared?
They could question Russell, and it was actually my notes, it's mentioned that earlier and one of the problems with live TV is if you get a, you get a phone call as your as this occurs so sorry about that. That wasn't someone that was made having a phone a friend answer. And the answer to your question is we invest directly in equity, but then also in debt. And so so that directly into assets, but then also directly into property funds that have fund investments and lots of different underlying properties as well. So we're agnostic about which the best path is. It that vary asset and an opportunity specific. The second part of your question around Gearing and across the equity part of the portfolio.
We have gearing at around 20 percent, sir. Rates are very attractive. We can get a lot more debt than that across the portfolio if we wished. But we think that's a prudent level of gearing for the sorts of opportunities that we're after. Thanks, Michael, and a question from Steve. You mentioned you do evaluations often. How often specifically is it monthly, yearly, etc.? Yes. So on a normal basis, the guidance assets, specifically the large assets generally done on a quarterly basis.
And we can do monthly updates and monthly updates, your income, et cetera. We valued everything in the portfolio during March. And then all any sizable asset and all the large funds that we invest in, they're all getting value on a monthly basis as the Covid cirsis continues on. And, you know, more information is now on whether whether it's positive or negative. All of those come through. And and yet I consider it into the valuations.
Thank you, Michael. And a question here from Steve, It's a two part question. The first part is. Is it possible to get returns updated daily? And if you like, we can we can take that one off line. But the second part is right now, the end of April figures look dire. But I suspect an updated report would be quite different. So perhaps if you can comment on the performance side of things in terms of to the end of April and how far things are since since then.
Yes. So not exactly sure what specifically you're referring to, Steve, but I think to the end of April, if you looking at the property option that we have, we have two different options on the platform. One is the property option, which has around 75 percent of what I've been talking about today at the unlisted assets and 25 percent of global rates and therefore liquidity. And then we also have an irate option, which is Australian rates only an index option that that's 100 percent Australian rates.
And both options are being negatively impacted by markets higher. It's more so. And then there was a rebound through April as markets recovered from their March lows. And we don't look, it's still relatively early to tell where a thing where markets go from here. Listed market, as I showed on the previous on one of the slides, quite volatile. It's really market sentiment that it will be driving those values right now because people are basically trying to predict where they think values will behave in future.
Our external valuation process, we think. So what we did in March and when we took those valuations down, most of those are when the formal valuations, external valuations have been updated for the end of April. They've all come in there or thereabouts where we took those marks in March.
So we think that there's a stabilisation there.
But if Australia continues to open up schools, work and restaurants, etc, then you would expect that there'd be more of that recovery back to where we were. There's still a huge amount of people on jobkeeper. The economic uncertainty is is real at this point. So I think that's still a good couple of months to wait until we see how Australia recovers from from the downturn and jobkeeper, etc.
Thanks, Michael. And we are running pretty short on time. So perhaps we've got a couple, Just a quick answer here. Another question from Russell, Wadey. If you revalue an asset at, say, negative 10 percent, does the gearing at, say, 20 percent, mean the overall downward impact is negative 12 percent. I would have to double check them. Essentially, yes, so yeah, if you're marking an asset down by by 10 percent, yet the gearing will will mean that it that it ends up being worse. I think the math be a little bit different. But yes, essentially it's a larger impact the more gearing you have, which is when I mentioned that prudent level of gearing, 20 percent gearing helps you a lot. When markets are good and it hurts you when market supports.
Thank you, Michael. And look very conscious of time. Appreciate all the questions coming in. And as I mentioned before, we're happy to take those off line and actually deal with the questions direct. So please, with those questions or any others. The BDM team is most happy to help reach out to us. Let me take the opportunity to thank you, Michael, and obviously thank the listeners. As I say, we're very keen to be open and transparent and very, very difficult times to give you confidence in the client's confidence.
There's material, but I'll put up on the slide. It's a reference point on some super website for you and your clients that you're most welcome to. Look at, look at. Please don't miss the rest of the webcast series. We're looking to involve a number of other investment managers and our investment managers will talk about, as we have done today, objectives, the constructions, the holdings and the performance of various asset classes. Keep an eye out.
E-mail will come out later either today or tomorrow. Today's recording. And we'll also have a registration link for the series. So I'll definitely invite you to join us for our other webcast. So thank you, Michael. Thank you, listeners. Appreciate your time and trouble today. Thank you.
+ Show/Hide transcript
Hello, and thanks for joining us on this very special episode of The New School of Super. This is a webinar, especially for our registered advisers, because we know you're very interested in how Sunsuper has been holding up through these extraordinary times. We know that you care very much that the Super fund you recommend to your clients is a safe pair of hands. Now, normally on the new school of Super, I would be joined by my partner in crime, Brian Parker, our chief economist here at Sunsuper.
But he's not with us today. And I know that you all love him very much. And so I apologise for that. But I'd like to think I've got something even better to bring to you. We have our chief executive officer, Bernard Reilly, and our chief investment officer Ian Patrick to talk to you about the experiences over the last two months and to bring those questions you've been asking out to the adviser community so that you have the answers you need to know.
Now, before we do that, I do want to point out, as silly as it seems, that this is general information only and give you that general advice warning. And in case there are any clients watching, that this webcast is just information only. It doesn't take into account your personal circumstances. And if you are thinking of actioning anything off this webinar today, please seek financial advice. Nothing can replace great quality financial advice. So we might kick off.I'll just introduce you both. We've got Ian Patrick, our chief investment officer. Hello Ian. Hello Anne, how are you? I'm very well. And then we've got, we've got Bernard Reilly, our CEO. How are you, Bernard? Great to see you. Anne I'm well. Good morning, all. I hope we don't disappoint you. You've built us up. Now, I hope ee don't disappoint relative to Brian.
Well, you know, he he is fabulous. He'll tell you all about that, as I jokingly say so. But that's that's why he is loved. He does bring . He's a great ambassador for Sunsuper. But I'm sure you will be fantastic. So, Ian, I might start with you, if that's OK, because we have been collating a number of the questions from our very valued registered advisers that recommend Sunsuper.. Before we do that though, how are you holding up what it's been like to be the CIO of one of Australia's largest super funds in a time like this?
It's funny, I said at some point along the path in early March. To my colleagues in the executive leadership team, strap yourself in. And little did I know at the time what I was actually saying. I think the relative order in markets,and I say relative order in markets more recently compared to the latter stages of March, mean it's been a slightly easier place to be monitoring and responding to the portfolio. But it is by no means straightforward from the point of view that there are many uncertainties still ahead as everybody who reads the news and holds on to the next press conference or whoever their favourite is, whether it's the governor of New York or Scott Morrison, you'd know, those uncertainties exist.
So we're in for tricky times, perhaps in stewarding people through their investment decisions over the next year, maybe two.
So Australia has obviously we've done a great job in containing the virus. And has that changed your view, the short and longer term view on the impact of the economy and the recovery in. I think it offers template for hope about the pace of recovery. But my personal view is there's still a number of unknowns. Epidemiologically there is still the risk of secondary outbreaks, whether it's here in Australia or anywhere else in the world.
The fact that we could see a policy response that closes up economies again or slows them down again. And so whilst it's encouraging that the curve that's being flattened to the extent it has and that will help everything from people's behavioural response. In other words, feeling confident to go out to engage in daily activity, start to spend money again across the economy, and hopefully, therefore create a shallower u in terms of the shape of the economic recovery. But I think it's very early to declare victory.
We're definitely a beneficiary of being, I think, an island state and being able to close the borders and manage the inbound infections. That's where we have an advantage for sure. And so, yes, it's probably somewhat optimistic on the Australian economy given the flattening of the curve. But I wouldn't hasten to say that we've still got to do that. We're going to avoid a severe recession and find it difficult in terms of the pace of recovery on the other side.
Do those insights around us being an island nation and the like, inform our view on asset allocation or where there are compelling investment opportunities to be found? I don't think so, because we're having said we are an island nation and that helps control the spread of Corona virus. We operate as a very open economy in a very global context. And as a consequence, and we've seen evidence of this in recent days, as a consequence, our customers for many of our products are external.
We can only generate domestic demand to support the economy to a point we're dependent on being able to export to a wide variety of markets. And if economies slow down and the political response to Corona virus is weaponized further and trade contracts, I'm not sure we're going to be in a tremendously good space, notwithstanding our ability to contain the virus itself.
But in terms of investment opportunities and particular asset classes. Andrew Fisher, our head of strategic asset allocation that many in the adviser community would know is what are him and his team thinking about as they seek to optimise our members, your clients retirement savings?
It's an interesting question because of the pace at which opportunities emerge. I think there's often an expectation when you see a sharp equity market sell off that opportunities will about. The reality is that it takes some time for bankruptcies and distress, other forms of distress to emerge in markets. And so what we're seeing right now in terms of opportunities is what I call are technical opportunities areas of the credit market, which are particularly technical in nature or where there's particularly liquidity stress, meaning people want to sell but don't have the ability to sell.
And therefore transactions are happening at distressed prices. But those are very technical opportunities. What we'll see in time is more of the distressed, distressed private equity, secondary, private equity, people trying to sell units in infrastructure and property funds at a discount to a mave discount to prevailing price. Those will emerge as more stress sets in. And so probably into the second half of the year the breadth of opportunities will open up. Right now it's those technical opportunities in the credit markets.
It's participating in the capital raisings for Australian companies that want to improve their balance sheet position to weather the crisis. And a few other associated opportunities, but I think the real opportunities will emerge down the track.
There has been a lot of noise, particularly in some segments of the media, around alternative assets, and there has been also, too, for some time much debate in the adviser community about the role of alternative assets when you're risk profiling a client, are these assets, growth of a defensive? Has this experience changed your view on how we classify those assets Ian? It hasn't changed my view on how we classify them. I think it is important to reflect on perhaps a difference between now and the GFC.
In the sense that. Member behaviour, meaning the ability of an individual to make a decision to move from the balanced option or the growth option to cash.
Has stepped up a level, part of that, I think, is the fact that people are more engaged with super. Part of it is the fact that the market falls in this particular episode were much sharper than the grind slow grind down in the GFC. That means people are transacting in these unlisted assets by selling the balance. We have to be very attuned to equity between members who transact. So one thing that we have been responsive to is ensuring that the valuations that we mark those assets at are reflective of the underlying economic conditions, as uncertain as they may be we've got to make a decent attempt to do that. So we have seen the value of those assets marked down. Not anywhere near the extent of mark downs in listed markets. Does that mean that they play a different role in the portfolio? Absolutely not. They are still late for a combination of growth and defensive characteristics. And we would expect them to fulfill that combination of growth and defensive characteristics through a cycle. But in the very near term, they have exhibited some correlation to listed markets.
But that's because all underlying economic activity is the price, the macro effect. All assets like airports and shopping centers and office towers and the like. Liquidity also is part of this story around the role of diversified alternatives, and there have been some voices, I guess, that are almost being scaremongering around the role of diversified alternatives within super funds and the impact on liquidity and how safe your money is. What have been your reflections and insights during this crisis with people switching to cash with our exposure to unlisted assets, increased job losses and potentially an impact on, well we know there has been an impact on the net cash flow into the fund, though it obviously is still strong. What have been your reflections on liquidity as the CIO of one of Australia's largest funds?
My reflections have been that the preparations that you put in place for managing liquidity are everything. And the fact that we had a well-established liquidity management plan and a very well established stress testing program, whilst they didn't foresee a pandemic like the COVID- 19 pandemic, they were intended to replicate the types of member driven switching activity, market falls, perhaps exits of blocks of members not anticipated to be early release, but perhaps because there was a large participating employer, really, everything was built into the stress testing program. So what we've seen in practice through this has been well within the parameters with which we stress the portfolio as part of our overall liquidity management. And that means the portfolio has been exactly where we would have liked it to have been positioned in this environment. In other words, we able to raise liquidity, be prepared for all the necessary payments due to early release and not undermine the long term strategic positioning of the portfolio. So it's served, I think, particularly well. And that's about preparation. It's not about being able to foretell the future. And that's been quite, quite useful and gratifying to me. But it also proves, given the the policy change that we saw, that you need to be conservative in your stress testing, because there are always the unknowns in this instance, the policy change.
That's certainly very true. I think that's the one thing we all know now, it's just to continue to expect the unexpected, you can't possibly predict the future. Bern, I might throw to you if that's okay, because Ian touched on that, obviously, the policy around early access. How long have you actually. How long have you been CEO now? Does it feel like a long time?
It feels like , so it's only just over six months. And it feels like the time's gone really quickly and the time's actually gone really slowly. But we think about early release there's a couple of important context here, so think about the fund as having 1.4m odd members spread across the country. But as a multi industry fund, we spread across the entire economy. And so I think while at the early stages of this crisis, it was certain parts of the economy that were more affected. The retail and hospitality sectors and the like. As you know, over a million people were stood down from their jobs, it's really been spread across the economy. So we've seen that spread across our member base, who have been impacted by this. And so then when we think about early release in particular for us I think through yesterday, it's about one hundred and thirty odd thousand members who have elected to take early release for about $950m. And we've been able to pay members that ten thousand dollars,or whatever amount they had up to that $10,000 limit, we've been able to pay them in two days. And if you think about that from a business perspective; one of the first things I did when I came in was I actually looked at the fact that we self administer and looked at that and thought. Does that make sense? And what's our, what is the benefit to our members for us to do that rather than outsource that? And I think this is clearly one of those times when having our own administrator in-house has been a great advantage for our memebrs to be able to to pivot and pay out funds as we needed to. But also having our own contact center in-house. The the last two months, April and March, we've seen double the number of calls into the call center for members who have either been concerned about the market volatility or members who wanted to get some more information about early release. And so to give you a context of numbers, that's about 150,000 phone calls, the Contact Centre took over those two months, which just is double what we normally would take. So I think having the resources in-house to be able to respond, I think is also really important from a longevity perspective, because members will remember how you responded when they needed you.
I, I couldn't agree more. And I think, too, it's been great,we've been able to. We've hired sixty five family and friends of staff to help dig in and do all of this paperwork and administration, answering the answering the calls that need to be answered during this time, said 65 extra people in the economy that have got a job.
Do you think actually in respect to liquidity, Bern, do you think this has, has this rattled you as the CEO? Have you felt stressed at all? Have you lost any sleep at night? What's been happening with employee SG. What what are your insights?
So firstly, I started off six months ago with grey hair, I still got the grey hair so I don't think it's stressed me that much. I think what I've noticed is coming into an organisation new as the CEO, you do wonder how the organisation will respond to a crisis and I think, so an early test in my my tenure as CEO,has been a good one.I think the organisation across the board has served me members well. I mean, Ian spent some time talking about liquidity valuation and I've experienced a lot of that first hand. And I've got a 30 history financial services, largely funds management, so I've seen different crises ,but none of them are the same. And so the way that we responded with liquidity, being able to make sure we had enough liquidity, the way we thought about valuations, why we just about listed equity and fixed income market allocations, I think that has been handled in an unbelievable manner for our members firstly. But then I look at the rest of the organisation and I think about the fact that our Contact Centre, as I mentioned earlier, were able to respond the way that we've been out of reach out to the adviser community. And then I think that our 1100 staff, who in February hardly anybody worked from home to where we've now pivoted had the whole organisation work from home. So I think it tells me a couple of things about the resilience of the organisation, the fact that we're able to adapt quickly, to respond to the needs of our members and also the environmental factors that we find ourselves in. I know we did, when I was early on my first month or so, we did a BCP, business continuity test and part of that was about us being out of work from our disaster recovery site; that didn't consider social distancing. And so the fact that we were able to not just rely on that, but then pivot away from that and be able to have people work from home, I think reflects the thinking and the preparedness across the board with the organisation to eb able to serve members.
And I would like to echo those comments Bern, certainly the advisers, the members that we have a financial advisor looking after them have been very well prepared to handle and to weather this weather this storm. There have been many members that have been performing acts of self-harm that are not advised that have been switching to cash at the start of the crisis. And if we look, there will be a retrospective down the track where we'll have some great data to understand what our advised members did, and we very much appreciate the care that you've taken for the members so that they can sleep at night and their retirement savings are secure. But Bern around SG, there's a little bit of, do you have any insights around SG?
If you look at SG, the first quarter SG has to be paid through the end of April, as many of advisers would be aware. And our SG was actually above what we'd forecast, and we'd forecast a very healthy SG number for the first quarter of this year. And so I think that's an interesting reinforcement both from the employer and the member community around the importance of superannuation. And so even though we're going through a difficult time, sorry, my dogs barking in the background,that's what happens when it's live. I think that's a really important aspect, the value I think Anne mentioned, I think that we'll perhaps see more engagement. But I think that this is reflected I think in the SG and the engagement we're having with members around the fact that the value that they put on the ability for this as a savings vehicle is really important.
Just a personal reflection that my dog Larry the German short haired pointer is really as happy as Larry having me home and maybe one day we can all bring our dogs into the office. So I'll continue lobbying for that unsuccessfully I'm sure,but the dogs have never been happier across Australia.
Bern, what's your view of the QSuper merger and has COIVD impacted that at all? Particularly Queensland advisers very interested in this development.
We're still committed to going through the process,most definitely. And I think if anything when we talk about where megers and the like are going to go I think it still has a lot of strategic rationale for us to really seriously consider this. It's slowing down, the process has slowed down a little bit, given the pivot to work from home and the market environment, it's probably delayed us a couple of weeks, but now we've got a team within Sunsuper that's dedicated to look at this. And so they are actually up and running, some from the office where Anne is and some from home to actually focus on this at the moment. So, as I said, I think we've slowed down a little bit, we're still committed to to to look at the process that we're going through, really to continue to to focus on this and look at the benefits. But I will say again, I think in one of our earlier discussions we mentioned, it really needs to still the criteria for success for this isneeds to be in the best interests of Sunsuper members. It also needs to be in the best interests of QSuper's members for both parties to agree and then finally there needs to be in the best interests of the combined membership base to make sense. And so we're still working through some of those issues at the moment to see whether that's the case or not.
Do you think we'll see more an acceleration of super fund mergers? There's been talk about it for some time, but it has been quite sort of lethargic, shall we say. Are we going to see some more velocity?
I think we will. I think what's going to happen after, so a combination I think of market volatility that we've seen , member demands and I also think early release has a part to play in that. I think it's going to mean costs are going to go up in broadly across the industry. And so I think that's going to drive more on the merger discussions. I think, coming out of this, you know hand on heart, we've performed for our members well as well as it relates to investment returns. I think pivoting for liquidity and also early release. Probably not, I don't I think every fund will be able to say the same thing. And I think, therefore, their members, as we know, will have choice, will also reflect on that and think are they in the right fund. As I'm sure will the adviser community reflect that on behalf of their clients. And so I think we will continue to see movement in the membership basis, and I think we will see increased velocity associated with merger activity. But it'll again, it'll take some time I think.
Well, you mentioned the adviser community Bern, and it's been five years, I guess, since we opened our doors to work with financial advisers across the country; we were the first industry fund to do so. And I'd like to think that we are doing it for the good of everyday Australians who want financial advice and need access to a high quality, low cost product like ours. But we also recognise most advisers are small business people and have themselves to pay, staff to pay, businesses to run. And in a regulatory climate as it is, it's harder and harder and more expensive to provide financial advice, which is why being easy to do business with as a product manufacturer is so very important. What what could you share with the adviser community around what we're thinking about to achieve that goal?
I think there's a couple of parts I think I'll add to your comments around the adviser community being small businesses. But also they're small businesses that generally have face to face contact. And so we're in an environment , we're all here on Zoom, I imagine that the advisers are finding the same, having the same discussions with their clients via Zoom or whatever technology platform they use. And that makes it difficult when we think about physical signatures, when we think about ID and the like and so some of the things that we've been focused on are and digital signatures. So now we've gone down the path with a product from Adobe and we're looking at one that's very popular in the market is Docusign. And so we're looking to integrate that into our processes as well, to allow the adviser community to be able to use Docusign as well as Adobe sign to be able to that electronic signature. And then also when we think about ID, electronic ID member, we're looking at ways, I know we're still looking at forms, we're allowing that we're looking at ways to be able to allow your clients, our members to be able to to identify themselves electronically.
The other part I wanted to mention as well, I think is around a lot of members that are in pension phase; one of the things that we've done recently is update the information with the Department of Human Services as well. So thereby updating the balances that, because we've seen a drop in the balances based upon market moves and so updating those balances, then makes it easier obviously for your clients points to, in their discussions with the Department of Human Services around balances and the like. So they're a are a couple of steps that we're taking at the moment.
I think Anne and her team continue to have great dialogue with the community, the adviser community, and we'll take that feedback on that you give us and try and incorporate that as quickly as we can to make your lives easier, particularly in what's really a difficult environment for your clients, where they're concerned about the volatility in the market, I know they have been, we've had calls from a number of clients directly, obviously, through that call center and and also through the advice community we've seen that as well. So I think the way any way that we can work together to make it more effective for your clients is important to us.
I think when we talk about financial advice, it's certainly a doctrine of faith we have here that I jokingly call it the Holy Trinity, which is a reflection of my sort of upbringing, the Irish Catholic upbringing, but the holy trinity of retirement outcomes being a strong, reliable investment performance, high quality, low cost product, and then working with you high quality personal financial advice to ultimately deliver on the best retirement outcomes for Australians.So we know you play an important role in that.
Bern are there any final reflections as the CEO that you would like to share with our viewers today?
Thanks Anne, I think firstly its around preparation and preparedness and Ian mentioned that around from the investment side, the way we thought about valuations, liquidity and the like, prior to any crisis. And I think from a business perspective, a lot of the work that we've done around that also is important. I think that then flows on through to your clients and the members as well, around preparation. But it's more that preparation for market volatility and also from the timing, and how our members and your clients think about that and then the role really that advice community plays in that is vital. Around how do you you prepare? Yeah, this is this would be the first for some of our members, our younger members, this will be the first market downturn they've experienced and therefore how they respond to that I think is important. And then those members who are close to retirement, you know the market's have dropped, we've seen some recovery, but that has an impact on the corpus they have for retirement how they seek advice from you to actually fulfill their retirement dreams is a really important part of that time. I think preparation's the big thing I've learned from this. So then the final comment I'd make as I know we're running out of time is to thank you, the adviser community, for supporting us. We've tried to be there it in different forms, obviously from input from the contact centre, from Anne and her team and Ian and the investment team. But your support is important as we all work through what's really, I hate to use the word unprecedented because everybody's using it, but in an unprecedented environment.
It is it's like flattening the curve; I never want to hear that expression again either. And to that end, around providing information, particularly around the investment team, we know that confidence in our investment methodology and performance is so incredibly important. But not just that, transparency is critical. And so we are having a webinar series, a deep dive on all of the components that make up our diversified alternative investment class. And we will be going through a deep dive case study on how we identify different assets, the due diligence we undertake, the role that those assets play in the portfolio, how we decide if we end up divesting of a portion or all of an asset; to give you that confidence that we really are a safe pair of hands as an investor, to manage your client's money.
You can, of course, contact Mark Stubbings and the business development team based around the country if you have any questions, your BDM can help you in. Ian Patrick, I'll throw to you for a final remark before we close.
It's an oft said thing, but I think it bears repeating, and that is that crises inevitably end and they inevitably create opportunity. And the appropriate thing right now is to think through the crisis to what is going to be important in ensuring those opportunities are exploited. And that's where we are very focused and I'm sure all advisers are too for their clients. But markets will recover and we will all reflect back on this at some point as an interesting but worthy test for investment portfolios.
Ian and Bernard, on behalf of the adviser community, thank you for your continued accessibility and transparency in providing information. And to our viewers, thank you for joining us. And we look forward to seeing you again soon.