APRA admits super funds have used MySuper as liquidity tool
A roundtable of superannuation fund executives and regulators have acknowledged that some funds have been using their MySuper portfolios to manage their liquidity issues.
The admission was made in the context of the liquidity challenges encountered by some superannuation funds as they sought to deal with the former Coalition Government’s COVID-19 early release regime.
The importance of the MySuper liquidity management approach flows from the fact that those attending the roundtable convened by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) included the chief executives of Australia’s five largest industry funds plus the Insignia Financial’s IOOF.
The funds included in the roundtable were AustralianSuper, Australian Retirement Trust (ART) HESTA, UniSuper, REST and IOOF.
The APRA analysis of the roundtable stated that “historically, some funds have used their MySuper portfolio to manage liquidity”.
It then went on to specifically reference the impact on member returns of funds using MySuper portfolios as a liquidity management tool while noting the impact of member equity APRA’s Prudential Practice Guide SPG 530 covering Investment Governance.
That guide, released in July, last year, imposes strong regulatory expectations on superannuation funds, including that they can meet their liquidity requirements “including ensuring beneficiaries can redeem investments, when required, in a range of market conditions”.
“It is important that an RSE licensee has a clear understanding of the liquidity demands on the RSE, and each investment option, and how these demands might affect asset values and the RSE licensee’s ability to meet portability and payment obligations,” SPG 530 said.
The APRA summation said the super fund chief executives “stressed it is important for funds to understand the relationship between public and private assets, as well as how changes in valuations of one asset can have a significant impact on the overall balance of asset allocations and the funds liquidity levels”.
“They asked APRA and ASIC to consider what work they can undertake to assist the industry in ensuring there is a more consistent approach to private market valuations.
“The CEOs agreed that as investment opportunities in private markets continue to open, it is essential that funds have prudent valuation practices and investment governance,” it said.
“ASIC reminded trustees investing in private markets to be mindful of their conduct obligations and to foster market integrity. It was noted that private markets are not naturally as transparent as public markets and trustees need to be focused on providing transparency. Trustees using external fund managers need to ensure they are holding their providers to account, and clearly understand what information is held and who acts on their behalf while maintaining robust controls.”
It just keeps getting worse for these charlatans. Please let us never hear about industry fund ‘performance’ ever again. The idea that these $100bn+ giants can somehow ‘outperform’ has been perpetuated by a clueless media (present company excluded) for too long. Fantasy unlisted valuations, using MY Super to bail out liquidity crisis, using member funds to pay unqualified union delegates, political donations, etc. etc. Why all this effort when you’re ‘not for profit.’ What a joke.
“The CEOs agreed that as investment opportunities in private markets continue to open, it is essential that funds have prudent valuation practices and investment governance,” it said.
A by the way nothing to see hear we’ll let you when we have decided what that looks like, now off you go APRA (pat on the head) good little boy.
How cringeworthy – a very small pose of fund CEOs are sat down to have basic 101 liquidity and private versus public markets regu-splained to them, they nod, agree, and move on. Everyone’s box ticked on that one.
Lol – another day and another joke. No worries.
Working at APRA I take great offense at this article and all the comments.
I know the 400 staff looking after the prudential regulation of the Banking sector laugh at me, but me and Tony in the Super section are working as hard as we can and I think the Super section team (me and Tony) writing that circular smashed it.
Recently I met with the Treasurer, and he made mention of the political donations they received from the Super sector, and told the two of us, that we were doing a really good job. He even said me and Tony could continue to work from home 2 days a week too. So you can all go and get stuffed.
Have you worked out the real asset allocation of the HostPlus Balanced fund yet? Cheers to you & Tony.