IMF Warns on Australian Pension Funds’ Private Assets Exposure
- IMF says illiquid investments can cause “liquidity mismatch”
- Pension funds are boosting allocations to private investments
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Australia’s fast-growing A$3.9 trillion ($2.6 trillion) pensions industry is contributing to a higher chance of large market gyrations due to the increase in private-market investments, according to an analysis by the International Monetary Fund.
Some funds in the country’s pensions system — known as superannuation — have raised allocations to illiquid private equity and credit to more than 20%, the IMF said in its Global Financial Stability Report released Wednesday. With the world’s highest share of defined contribution plans, allowing members to quickly switch investment options, the IMF identified a “liquidity mismatch” that may have an impact “in a liquidity stress event.”