Super funds facing at least quarterly asset revaluations
Superannuation funds will find themselves having to undertake the valuation of unlisted assets at least quarterly, under a new investment governance approach outlined by the Australian Prudential Regulation Authority (APRA).
As well, the regulator is making clear to superannuation funds that if they want to take investment management in-house, they will need to resource it just as strongly as an external provider.
The regulator said it expected superannuation funds “would undertake valuations on at least a quarterly basis” and would be expecting an explanation and justification from funds which chose to value assts less frequently.
“Where an RSE licensee chooses to undertake valuations less frequently, APRA expects the RSE licensee would demonstrate how it has determined that the valuation frequency is appropriate. Factors that would inform valuation frequency include, but are not limited to, the frequency with which member transactions are permitted, how valuation data is incorporated in unit prices/crediting rates, access to valuation information and costs,” the APRA guide said.
APRA issued a draft Prudential Practice Guide covering Investment Governance yesterday making clear its expectations and detailing just how much information it expects superannuation funds to have available.
With respect to unlisted assets, APRA said it expected superannuation funds to be able to explain “the ownership structure including information regarding Board membership and senior personnel, the business plan of the organisation, financial analysis of any private market for the investment, any future commitments required and any restrictions that limit the ability to exit the investment”.
The regulator has also made clear that it has significant expectations with respect to superannuation funds which choose to take investment management in-house, stating superannuation would need to have the appropriate skills and resources available to undertake the internal management of investment portfolios.
“The number of personnel, and their skills and experience, would be comparable to what would be expected of an external investment manager undertaking an equivalent activity,” it said.
“Further, the systems, data, operations and policies supporting internal investment management would be comparable to what would be expected of an external investment manager undertaking an equivalent activity,” it said.
On the fixed time of 30 June, not 31 July, after they’ve rorted the Default Super fund ratings yet again with the delayed valuation of their unlisted assets.
I also wondered when this would have to happen – Will those clients that keep their funds with the industry funds be able to do a class action based on those that have been able to pull their funds out at the higher unit price or viceversa due to industry funds not having to revalue their property assets every 3 months?
I think that the underlying issues of equity here are huge and warrant further investigation.
Wow. This is a highly courageous decision by APRA. Clearly it is designed to rein in some of the deceptive scams perpetrated by union controlled “Industry” super funds. With the current federal govt now also controlled by the unions, expect to see whoever made this decision at APRA given the boot, and replaced with a union puppet who will reverse it.
We all know why APRA has had to take this action, so why not name and shame the dishonest practices from the union funds? Despite they nice press release I doubt anything will change. APRA isn’t saying it is compulsory, and like every other regulation that seems to apply to everyone else, the union funds will continue to do what they want, whenever they want with any fear of a consequence.
Exactly, I’m sure APRA will have left a gaping hole to allow Industry Funds to escape from real and more regular unlisted asset valuations clause,
“Where an RSE licensee chooses to undertake valuations less frequently”
Eg. Dear APRA, we Industry Super Australia and All our Funds can’t possibly undertake such regular valuations, because:
i) It will make it harder for ISA Funds to artificially inflate returns in down markets.
ii) It will make it harder for ISA Fund Trustees to sell out pre major revaluations and market corrections at the expense of members.
iii) And finally, it’s simple, we are ISA and our Funds make our own rules, sorry APRA we control you remember.
APRA reply – Thanks ISA, of course you really don’t have to comply, it was a media release to appease some, please don’t concern yourself with real and regular valuations, carry on as is with whatever values you think you need to use.
At last, good news from Apra, particularly after the stuff up of the 2021 compulsory changes to income protection. Yet it is not clear whether these changes are indeed compulsory. Perhaps that change will put a stop to those glossy CBus ads with the two workers on the Brisbane River congratulating themselves as not only the builders of the multi-storey glossy tower, but also the owners, via their membership of the super fund. Try explaining to a worker the problems with unlisted assets and see if you last more than five minutes. They are totally, blissfully, unaware and the superfunds aren’t going to tell them without a fight
Quarterly valuation of unlisted assets will set the cat amongst the pigeons. There is going to be some very poor returns, a rush for the exit, and blood on the floor.
Residential and Commercial Property within a SMSF is also an ‘Unlisted asset’ … will SMSF’s be expected to do the same?
SMSF’s don’t manipulate unlisted valuations to then advertise falsely inflated returns.
SMSF’s don’t have multiple trustees using inside information to sell out of these inflated assets pre being revalued down to the detriment of other members.
But yeh good try ISA Funds people, got to always try to throw crap at SMSF hey.
Similar to property valuations, you can pick and choose the value you want, especially if you are the one paying the valuers. I don’t think this will solve the issue it is trying to address, but better than nothing I guess.