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.
Yeh ok what a joke APRA.
With up to 50% of Assets in Industry Super Unlisted and APRA do such a pathetic assessment of only 1 of these unlisted assets.
Great effort APRA, nothing to see here move along, it’s Industry Super allowed to do as they choose.
Regulatory Capture Corruption at its worst APRA & ASIC to Industry Super
Frankly APRA wouldn’t even understand unlisted products.
Who knows, but I’m not that confident given the methodology of the performance test that is used….
Don’t forget that they would have advised all the trustees in advance of the investment they would have been looking at.
Timing of the revaluation can have a huge impact on performance. The non-industry funds revalued their Canva holdings pre June 30 2022 (about March/April) while HostPlus conveniently revalued their holdings of the same business after July 1. I estimated it added 1% pa to the HostPlus balanced fund performance for the year. I checked this with a large fund manager who came up with the same performance enhancement number!
“However, the good news for superannuation funds was that the APRA review found that the majority of funds had appropriately valued Canva.”
So what happens to the minority of funds that perhaps didn’t???