The Australian Prudential Regulation Authority (APRA) has announced HESTA is set to make payments to two cohorts of members impacted by valuation decisions made by the fund in March 2020, at the beginning of the COVID-19 pandemic.
In a statement on Tuesday, APRA explained that during the period, H.E.S.T. Australia, trustee of the HESTA super fund, made downwards adjustments to five single sector Choice options invested in unlisted assets.
However, it did not adjust other options with exposure to the same underlying unlisted assets – including HESTA’s MySuper option – until one week later.
As such, the regulator’s concern was that the fund’s decision-making processes for out-of-cycle revaluations of unlisted assets were “not adequate for the deteriorating market conditions” faced by superannuation trustees in March 2020.
APRA further labelled HESTA’s valuation decision during the period as being “unfair” to members who switched from adjusted single sector options to unadjusted options within that week and members who were issued units in the unadjusted options during the relevant week.
“In one instance, a member who switched investments from the adjusted Choice options to the unadjusted MySuper option during the week in question was approximately $17,000 worse off,” APRA said on Tuesday.
“APRA has engaged extensively with HESTA on this matter, including supervision activities to oversee strengthening of HESTA’s policies and procedures around unlisted asset valuation decisions.”
The regulator commenced a formal investigation into the issue in January of this year, which has now been closed in light of the payments.
“In light of HESTA’s decision to make payments to affected members to make them good, and improvements to HESTA’s valuation policies and procedures, APRA has decided to close its investigation without further action.”
In a statement on Tuesday, HESTA separately confirmed it has been in discussions with APRA around adjustments to the number of units some members acquired in certain investment options during March 2020; a period, it labelled, as one being marked by “significant market volatility”.
“Upon further analysis, HESTA has determined that an adjustment to the number of units issued at the time be made for some members. There have been no findings of breaches or contraventions of the law. The median value of the adjustment will be around $17,” it said.
According to the fund, this adjustment considers the difference in the value of units issued to these members at the time and investment earnings that would have subsequently accrued.
The adjustment, it confirmed, will occur in the coming weeks, adding that impacted members will automatically receive the adjustment through their account.
HESTA has approximately 1.1 million members and approximately $88 billion in funds under management.
