Regulator points to super inadequacies on unlisted assets

Superannuation funds have been overly reliant on external parties such as asset consultants and others for dealing with their unlisted assets, according to the Australian Prudential Regulation Authority (APRA).

While financial advisers have sometimes been critical of the manner in which industry superannuation funds have used unlisted investments, particularly the frequency of valuations, the regulator is more concerned about how they run their investments.

Further, it has sent a signal that it expects superannuation fund boards to have more internal expertise with respect to holding unlisted investments, noting that “most trustees were inadequately prepared for the member equity impacts of significant market volatility”.

APRA general manager, superannuation, Dr Katrina Ellis has given the industry a glimpse of the findings of APRA’s thematic review of unlisted asset valuations by superannuation funds and the findings are mixed.

Looking at how things were handled as the industry moved into volatility surrounding the COVID-19 pandemic in March last year, APRA found that most funds had acted quickly and increased their monitoring and report of reporting around their unlisted exposures.

However, it also found that a number of funds were too reliant on their outsourced arrangements.

It said certain trustees were “overly passive and overly reliant on external parties”.

Further, it said most trustees were inadequately prepared for the member equity impacts of significant market volatility.

Ellis’ address to this week’s Australian Institute of Superannuation Trustees (AIST) ASI 2021 conference noted that there had been limited superannuation board engage in many entities.

Her presentation said that funds’ policy frameworks had typically been inadequate for out of cycle revaluations.