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How a $1.3b ‘conglomerate’ is protecting industry funds

Mike Taylor24 February 2022
Blocks depicting a conglomerate

The industry superannuation funds which are the major shareholders in Industry Super Holdings (ISH) are being directly challenged by the Australian Prudential Regulation Authority (APRA) to prove the value of their investment to members.

However, the regulator has admitted that because Industry Super Holdings is a “conglomerate” in the same context as BHP, the Commonwealth Bank or Wesfarmers, making a definitive assessment about whether an investment in ISH is in members’ best financial interests may prove difficult.

Answering a question on notice from Senate Estimates, APRA told NSW Liberal Senator, Andrew Bragg, that it expected all superannuation fund trustees to carefully assess financial relationships on an ongoing basis to ensure they continued to be in members’ best financial interests.

“Fiduciary obligations require the trustees of the shareholder funds to be able to justify that the services or other value provided by ISH are in the best financial interests of their members,” APRA said.

“APRA is currently addressing this direct question to the trustees of the shareholder superannuation funds in the context of the new law and will assess those responses to consider what action can be taken in the factual circumstances outlined.”

On the specific question of the status of ISH’s ownership of the New Daily publication, APRA said that the New Daily was “liable for its own actions”.

“The New Daily was originally funded with an investment of $12 million from ISH and five superannuation funds. This investment occurred in 2013, which is before the commencement of the best financial interests duty.”

“Approximately six years ago, the superannuation fund shareholders decided to discontinue their investment and ISH became the sole shareholder of The New Daily. This divestment also occurred before the commencement of the best financial interests duty.”

“APRA understands that the recent valuation of ISH is $1.3 billion, and The New Daily is valued at $4.4 million, 0.34 per cent of ISH’s value. Since becoming the sole shareholder of The New Daily, ISH has contributed an additional $16.4 million to The New Daily. This contribution occurred before the commencement of the best financial interests duty.”

“Since inception, returns from The New Daily to its past shareholders and current shareholder have been negative. As far as future returns are concerned, APRA understands that ISH is pursuing a new business model for The New Daily with the intent that it does not require further equity funding from ISH.”

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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The Observer
2 years ago

The point seems to be that the industry funds have created a corporate structure that APRA can’t navigate. Astute.