APRA review finds most super funds OK on unlisted assets
Superannuation funds have broadly passed muster with respect to valuation of unlisted assets, according to the Australian Prudential Regulation Authority (APRA) but there are still areas where improvement is needed.
The regulator has written to all superannuation fund licensees after having conducted a review of those identified as having invested in private equity technology company Canva to determine how they were handling such exposures.
It said that the review centre on Canva had been initiated because “in light of the deterioration in investment market conditions over the course of 2022 and Canva’s public profile as an asset in a higher-risk asset class, APRA selected Canva as the focus of a targeted review of unlisted asset valuation governance”.
However, the good news for superannuation funds was that the APRA review found that the majority of funds had appropriately valued Canva.
“We observed examples of better practice by RSE licensees, particularly relating to querying the valuation approaches of appointed investment managers and reflecting valuation adjustments according to the specific circumstances and policies of the RSE licensee,” the APRA letter said.
“These were issues flagged as requiring improvement in APRA’s 2021 unlisted asset valuation thematic review. Valuation methodologies applied by RSE licensees were consistent with their respective valuation policies and RSE licensee practices and policies were broadly in line with APRA’s expectations.”
However, APRA said in the letter that several areas required improvement and cited:
- inadequate interim revaluation triggers in valuation policies;
- deficiencies in information provided to the Board;
- gaps in Board skillsets, willingness to challenge information provided and access to expertise; and
- lack of consideration of the expected performance and unit pricing impact of valuation decisions.
APRA said it would continue to conduct reviews of superannuation fund practices in relation to its new prudential standard relating to investment governance – SPS 530.