Revaluation of unlisted assets due to COVID-19 market downturn
First published: 21 April 2020
The COVID-19 pandemic has created a market downturn across all asset classes. Whilst the value of listed assets such as shares are updated daily, until now the value of LGIAsuper’s unlisted assets such as property and infrastructure were still at pre-pandemic levels.
To ensure that all our members have a fair market price for their investments, the LGIAsuper Trustee has revalued its unlisted assets at -5% for property assets, and -3% for infrastructure assets.
The revaluation makes it fairer and equal for all members switching in and out of investment options. During this market downturn, members will get a fair market price for selling these unlisted assets, which would otherwise put other members at a financial disadvantage if sold at pre-pandemic prices.
This change was made on 21 April 2020 and is now reflected in members' account balances.
Aligning with marked prices
LGIAsuper’s diversified investment portfolio includes:
- Listed assets such as shares, equities and bonds.
- Unlisted assets such as property (housing, commercial offices, shopping centres) and infrastructure (ports, airports, rail networks).
The value of listed assets is continually updated on global stock markets, and this is reflected in our daily updates to earning rates. The situation for unlisted assets is different.
The value of unlisted assets is reviewed on a periodic basis. Property and infrastructure assets tend to be revalued quarterly or half-yearly. During a rapid market downturn such as the situation caused by COVID-19, it is important that the value of unlisted assets keeps up with market prices.
What this means for our members
Reducing the value of unlisted assets spreads the impact of COVID-19 fairly across all members with these assets in their investment options.
The impact to each member depends on the amount of property and infrastructure in their investment option.
Most of our members invest in our MySuper option, where we estimate the reduction in returns will be -1%. The estimated reduction to returns for our Diversified Growth option will also be -1%, and for our Property option will be -4% (listed real estate investments are 20% of this option).
Long-term diversified approach
LGIAsuper's diversified portfolio aims to minimise impacts to our members' superannuation during market downturns, and grow them again when the market eventually upturns.
During a market downturn, unlisted assets are an essential part of our investment mix because they are not as volatile as listed assets. LGIAsuper works closely with its investment consultant and investment managers to ensure that these assets continue to reflect real market value.
Market volatility will always affect account balances, but it is important to remember that when earning rates drop you haven't lost any money until you sell or switch investments.
Superannuation is a long-term investment. We urge members not to make any rushed decisions before getting personal advice.