The other multi-billion-dollar sector run by unions and employers

Mike Taylor

Managing Editor and Publisher

25 June 2025

What started out more than 25 years’ ago as a regulatory carve-out for funds established by unions and employers to cover award redundancy entitlements has grown into a multi- billion-dollar sector and the Australian Securities and Investments Commission (ASIC) is considering changing the rules.

The bottom line for ASIC is that, by its own admission, there has been considerable growth in funds under management of the schemes which, but for the regulatory relief that has applied over two decades, would be treated as managed investment schemes (MISs).

What is more, ASIC says that the funds have grown from simply providing redundancy benefits to now funding long service leave, sick leave, training and insurance benefits – things “not contemplated when we introduced our original relief”.

“We understand that in 2003 fund operators had approximately $500 million under management, and that by 2015 this had increased to $2 billion under management. We are now aware that some funds individually have close to or over $1 billion under management, based on information published in annual reports,” ASIC said.

“Despite the size of the funds under management, currently fund operators do not have to comply with the requirements that are applicable to operators of other managed investment schemes. For example, the statutory financial reporting obligations that apply to registered schemes do not apply,” it said.

“These requirements would otherwise provide ongoing transparency on funds under management and transactions undertaken. Further, the governance requirements that apply to AFS licensees, which set conduct standards and ensure conflicts of interest are managed, do not apply.”

ASIC last consulted on the arrangements last year and noted that it had received “divergent feedback” with existing fund operators arguing for the status quo, while an employer association argued that the regulatory relief should be revoked “and that it was appropriate to require fund operators to comply with the Corporations Act.

ASIC is now seeking feedback from stakeholders on changing the rules, throwing up three options:

Option 1—Allow the relief to expire and require full compliance with the Corporations Act.

Option 2—Grant relief from specific obligations in the Corporations Act.

Option 3—Remake the existing relief with additional conditions.