Regardless of what you think its value is, there is some truth to the old adage that something is only worth what someone else is willing to pay.

But there are many ways to manipulate a price that gives way to another equally old maxim, coined by Oscar Wilde: a cynic knows the price of everything and the value of nothing.

As global stock markets have slumped in recent months – with severe falls across the globe after interest rates began their ascent – ​​many big-name investors have been left nursing near-fatal wounds.

In Australia, this translates into losses in our $3.2 trillion national savings pool – pensions take the bulk of our workforce squirrels every month through our mandatory pension system.

For the first time in over a decade – since the global financial crisis – most of us will be disappointed to learn that our super savings have dwindled.

Only three balanced funds have managed to break into the black this year – Hostplus, QANTAS Super Gateway and Christian Super – and even then they barely crossed the line, with the former having a meager 1.6% return.

In the rest, the median result was a decline of 3.1%.

Terrible news. Except, given what’s happened over the past six months, it’s actually an amazing result, almost too good to be true. In fact, it may be too good to be true.

Did we escape a train accident?

Let’s just count the pain, okay?

Most of it was delivered during the second half of the year.

The MSCI World Index, which measures the performance of stocks in 47 countries, plunged 20.6% in the June half. This is the worst performance since the measure was created in 1990.

Tech stocks were among the hardest hit, with many big US names down more than 30% and some down double. The same was true for anything that contained only hopes of future profits or companies that were too indebted. The Buy Now Pay Later team has been transformed into Costing Now and Not Paying at all.

Then there are the obligations. These are debt securities – essentially IOUs issued by governments and large corporations – that trade on open markets, much like stocks. The only difference is that the bond market is infinitely larger than the stock markets and far more important.

Normally, when equities take a hit, bonds do well. Not this year.

The most traded global bond – which also happens to be the global benchmark for interest rates – is the 10-year bond issued by the US government. It has just recorded its worst performance since 1788, the year Captain Arthur Phillip sailed to Port Jackson to establish a penal colony.

There was even less joy among cryptocurrencies, down 61%.

I could go on, but you get the picture. Financial markets have been in a world of pain, thrown off balance by inflation, soaring interest rates and facing an uncertain future that may well have a big R attached.

So why did our Super hold up so well?

This is where the magic of valuations comes into the equation. Assets that are actively traded in open markets, such as real estate, stocks, and bonds, are easy to value. Prices change daily as buyers and sellers compete and it is easy to quantify their value.

But our pension funds have significant investments in assets and companies that are not listed or traded in the open. And so, evaluating them becomes an arbitrary process – a matter of opinion.

In the wake of the global financial crisis, our large super funds made a conscious decision to diversify their investments. It wasn’t a bad idea.

Caught off guard by the near collapse of the financial system and the carnage that erupted in the financial markets, many decided to put their money in stable, long-lived assets, where the income stream was relatively safe. economic ups and downs.

Infrastructure was an obvious choice. Toll roads, ports, poles and wires, water, airports have all been targeted.

After sucking up most of the infrastructure available in the world, they also started looking at a whole range of other assets. Real estate, unlisted companies, new ventures and a range of alternative assets run by so-called hedge funds and venture capital firms were also in favour.

Many of our largest superannuation funds have poured around a quarter of our cash into these unlisted and alternative investments.

Again, because many are not listed on public markets, their values ​​are deemed stable. And this is where the logic starts to blur. Because if the unit prices of listed real estate trusts collapse, shouldn’t there be a corresponding fall in the value of unlisted real estate trusts?

You would think so. But it doesn’t always work that way.

Where Canva and Klarna Collide

In recent years, Melanie Perkins, Cliff Obrecht and Cameron Adams have been celebrated as the young lions of Australian business.

In just over a decade, the online graphic design company they created, Canva, has become a global phenomenon with claims that it has built a customer base of over 75 million in 190 countries – a feat which catapulted them into the rich lists.

The company is not listed on the stock exchange. Instead, it funded its growth by raising money from private investors, including our big super funds.

In September last year, some investors in Canva estimated that its value had doubled in a matter of months to $58 billion, which was worth more than Telstra.

In the wake of the technological wreckage on Wall Street this year, however, that has taken a dive. The problem is that no one can agree on the extent of the decline in its value.

Some say he is now worth $25 billion. Others say, much higher. Two of our biggest super funds, Hostplus and Aware, apparently disagree. Not that either will reveal their valuations. But it appears that Hostplus has outsiders running the rule over its unlisted investments — of which there are several thousand — while Aware values ​​them internally.

Another investment firm, Franklin Templeton, has publicly written down its stake in the company. Others have not done so or, if they have done so, are silent.

The issue is further obscured because in many cases our super funds have not directly invested in these private companies. They invested in other investment funds, run by venture capitalists and hedge funds.

These third-party funds also price their unlisted investments as they see fit, placing an opaque veil over much of our retirement performance.

It is this lack of transparency that should worry regulators. Because it also creates transfers of wealth. Those who take money out of the super now – at potentially artificially inflated values ​​– are subsidized by those who put money into it.

Private valuation concerns came to the fore recently when Klarna, the Swedish Buy Now Pay Later operation in which Commonwealth Bank has a stake, suddenly found itself in a valuation vortex.

When she attempted to raise additional funds by issuing new shares, she suddenly found the closet empty. No one was willing to spit at the price he was asking. A year ago, he was supposedly worth $45.6 billion ($66 billion). Now, by some estimates, he is only worth $6.7 billion ($10 billion).

How to pump up your performance – and your ego

This begs the question. How much of our super fund gains and losses come from nothing?

Markets, even open and public, are often manipulated. You see it at the end of each quarter when global investment funds “balance the books” just before releasing their quarterly performance.

But opaque private investments open up a whole new world of opportunity. One of the easiest ways for venture capitalists to pitch their book is to pay, say, $10 million for a 10% stake in a startup.

A few months later, if all goes well, she can choose to inject more money. This time, however, he could invest $10 million for just a 5% stake.

Why would you do that? Looks like you’re changing too short.

Well no. Not if you look at it upside down. Rather than saying it only received half the shares for the same amount of cash, the venture capital group instead says its initial investment doubled. He earned a 100% return on this first installment.

Investors in his funds, including our own super funds, are thrilled! A few months later, he does the same. Etc. Ever-increasing profits, all miraculously achieved through a multi-billion dollar thimble and pea trick.

What happens, however, when things go wrong?

The answer is, we don’t know. But maybe it’s time to do it.