The principal of an investment services firm has called for new risk reporting for super funds.
New reporting requirements need to be introduced to the superannuation funds sector to help their board members and trustees better understand and measure their overall risk exposures, according to the principal of a major financial services firm.
"Is there too much risk [in superannuation funds] and is it being managed? Well, the answer is we don't really know the answer because there is no form of reporting on the issue," Mercer risk and finance practice principal Darren Wickham told attendees at a recent Association of Superannuation Funds of Australia luncheon in Sydney.
He suggested a solution to this problem could be the introduction of financial condition reports to super fund reporting requirements.
"These are reports that basically assess the overall financial strength of a super fund. They also delve in and assess the material risk faced by a super fund," Wickham said.
"But what does financial strength mean in the context of accumulation super? Basically, it's the ability of a fund to withstand risk and in a super fund that can be affected by the level of reserves and the business strategy of the fund," he said.
If made a mandatory reporting requirement, Wickham said he expected these reports to be able to assess four characteristics about super funds.
These include a projection of a fund's financial condition into the future, a review of the fund's existing risk management framework, and an insight into the material risk facing a fund through factors such as unit pricing and liquidity.
Wickham said this was not a potential solution that was only theoretical. Instead, it was a practical solution as these reports already have to be prepared by 20 per cent of superannuation funds as a statutory requirement because they are invested in life insurance statutory funds.
The two non-consecutive alphabetic letters encountered most often last week caused more controversy than the underlying policy they represented, Wouter Klijn writes.... read more »
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