The Superannuation System and its Regulation survey conducted by the Centre of International Finance and Regulation interviewed 28 fund executives over a six-month period to May 2014.
In the survey, respondents argued that both the product dashboard and standard risk measure have the “potential to mislead members, depending on how they’re used”.
“The standard risk measure, because it really has no relevance to most members who have an investment horizon beyond five years, and the product dashboard, because what member is going to be able to compare how many hundred or thousand things that will end up on the product dashboard?” argued one of the survey respondents.
“We’re very happy to provide lots of disclosure but we want it to be in a format that members can actually digest and understand.”
Another super fund executive described the direction of regulatory oversight and disclosure as “misplaced”.
“I’ve seen what our disclosure will look like and, believe me, I hate to say this, I can’t make head nor tail of it,” said the executive.
Another respondent criticised how risk is defined under the APRA model, which is “how many negative years in 20”.
“It doesn't identify when you do have that negative return and if it’s say for four in 20, there’s no indication of how negative that return is,” the executive argued.
The “onerous reporting requirements” in regard to lifestyle strategy products and how to report them was another issue raised.
“Suddenly you need to comply with the same format and structure that you would in a static balanced type option, but you need to report 10-year forward looking estimates of risk and return for life-cycle, which obviously change over time, so you get sort of a square peg in a round hole,” said one of the survey participants.
The super executives also described the requirement to provide in-depth disclosure of portfolio holdings data as “absolutely poor policy that will not enhance member outcomes but will only serve to attract lobbyists and vested interests”.
“I don’t know if you’ve ever seen a portfolio of fixed interest investments? … Well let me tell you, it is utterly meaningless to anyone,” said one of the executives.
The same executive also noted there are equity and hedge fund organisations that will refuse to deal with their particular fund due to the disclosure requirements “because they don’t want every position published”.
