Liquidity has been a running theme in my recent KiwiSaver posts, from the FMA’s report on private assets to the FMA’s 2026 Annual Report and the question of whether side pockets have a place.
This post looks at how one of Australia’s largest funds thinks about the same issue.
The i3 (Investment Innovation Institute) has published an interview with Chandu Bhindi, Chief Liquidity Officer at AustralianSuper (free registration is required to read it). The existence of the role says something in itself.
At the largest Australian funds, liquidity is managed as a dedicated function, and the interview shows how far that thinking has developed.
My angle, Australia is a few steps ahead of New Zealand, and the questions its funds and regulators are working through are likely to arrive here as KiwiSaver grows.
Where the risk actually sits
AustralianSuper stress tests its liquidity regularly, on a daily, ad hoc and regulatory basis, including the first industry-wide stress test run by APRA. Because the fund has positive cash inflows, it can meet most scenarios, including currency depreciation and the margin calls that follow it.
The breaking point is a run on the fund. Bhindi expects that to be an event specific to one fund rather than a market-wide one, and describes the key issue as “loss of confidence by members en masse”.
This is consistent with a point I made in Beyond the transfer headlines. A system that is cash flow positive is a reassuring backdrop, but it says little about the timing or concentration of outflows at any single fund. AustralianSuper has tested scenarios that combine geopolitical stress with a fund-specific event, which is a sensible combination to test.
Three levels, three lenses
The fund looks at liquidity at three levels: the member, the fund and the system.
Each is viewed now, in a crisis (covering both obligations and opportunities) and in the future.
The aim is to be able to choose how to respond rather than be forced to. That means access to several sources of liquidity, which reduces the need to sell into stressed markets and allows the fund to act as a stabiliser, buying when prices are dislocated.
Questions about the foundations
For me, the most interesting part of the interview is what Bhindi says about the design of the system. Members can move to another fund within days, or withdraw in full once eligible, and preservation rules and limits on borrowing create patient, long-term capital. The article notes Australia is now the fifth largest system in the world and forecast to be the second largest by 2030, a scale not contemplated when it began.
His questions are:
- Will those principles keep protecting members and the system as it grows and more members move into retirement?
- What is the trade-off between member choice and control and confidence in the system?
- Are the borrowing provisions clear, and do they cater for modern liquidity tools?
On borrowing, he points out that the Superannuation Industry (Supervision) Act allows trustees to borrow for up to 90 days to deal with short-term liquidity problems. Would a lender actually provide money to a fund already in trouble? And who is the capital provider of last resort at this scale?
These questions follow on from a proposal Bhindi made in March, that some funds be allowed to borrow directly to manage liquidity in a crisis rather than sell assets at stressed prices. The Conexus Institute responded in Investment Magazine, seeing some merit but remaining unconvinced of the need. Funds can already sell liquid assets within a three-day redemption cycle, borrowing into a falling market is effectively leveraging up on a rebound, a fund borrowing in a crisis could compete with the banks for funding, and borrowing would raise the question of regulatory capital. Conexus did agree that the speed of switching deserves debate.
Testing the end-to-end response
Bhindi supports industry-wide stress testing but argues the end-to-end response should be tested as well. A stress test can show vulnerabilities in a fund’s portfolio. It cannot show how third-party providers, counterparties and regulators would behave in a real crisis.
His call is for industry, regulators and government to share a coordinated playbook that has been tested and is well understood, particularly as more members retire but stay invested. He describes this as the next step in maturity, and says AustralianSuper is sharing information with APRA and the RBA to reduce information gaps.
APRA’s first System Risk Stress Test, was published in June. All participating banks and super funds withstood a scenario involving liquidity pressure beyond anything large Australian banks have faced in 50 years. However, APRA said funds need to lift their stress testing capability in line with their size, and that disruption to a material service provider could make stress worse.
Why this matters for KiwiSaver
KiwiSaver is not at that stage yet. As covered in my post on the FMA’s 2026 Annual Report, funds under management reached $138.8 billion, contributions of $13.2 billion comfortably exceeded withdrawals of $6.8 billion, and private assets were 2.4 per cent of KiwiSaver assets in June 2025, compared with around 16 per cent for Australian pension funds.
Three points stand out for me.
- Side pockets do not feature. Bhindi’s discussion is about stress testing, multiple sources of liquidity and coordination across the industry. That is consistent with the argument in my post on growing alternatives in KiwiSaver, that the fundamentals matter more than any single tool.
- Switching speed. Australian members can move to another fund within days. KiwiSaver members can generally transfer provider within ten working days. If Australian funds manage unlisted allocations alongside faster switching, the portability constraint in KiwiSaver looks even less binding.
- The cushion is temporary. Bhindi expects liquidity to become more complicated as members move into retirement but stay invested. KiwiSaver’s accumulation phase should not be assumed to last indefinitely, which is why I have argued for forward modelling of a scheme’s own fund flows.
On the regulatory side, the FMA found a clear uplift in liquidity risk management practice following its 2024 guide, with better defined escalation triggers and more developed stress testing still to come. I am not aware of a system-wide exercise in New Zealand that includes KiwiSaver, and the Reserve Bank stress tests I know of are focused on banks. Bhindi’s call for end-to-end testing and a coordinated playbook is one New Zealand will need to consider as KiwiSaver grows.
The bottom line
Australia shows what mature liquidity management looks like at scale: a dedicated function, regular and severe stress testing, several sources of liquidity, and a growing push for coordination with regulators. It has also built a much larger allocation to unlisted assets than New Zealand has. The two are connected.
KiwiSaver managers lifting their private asset allocations would do well to build the same capability now, while allocations are modest and flows are positive. A playbook is far easier to write before it is needed.
Further reading
FMA report on private assets in New Zealand managed funds
Beyond the transfer headlines: why KiwiSaver’s accumulation story matters more than the league table
The FMA’s 2026 KiwiSaver Annual Report: private assets and liquidity in focus
Growing alternatives in KiwiSaver: what needs to be in place
Sources: Liquidity Lies at the Heart of a Resilient Super System (i3), AustralianSuper’s call for leverage is bold but unnecessary (Investment Magazine) and APRA System Risk Stress Test findings.
Happy investing.
Disclosure
Please read the Kiwi Investor Blog Disclosure Statement before relying on any information in this post. This blog is written for information and discussion purposes only. Nothing in this post constitutes financial advice. All investment strategies involve risk, including the loss of principal. Readers should seek independent financial advice before making any investment decisions. The views expressed in this post are my own and do not represent the views of my employer or any organisation with which I am affiliated.
