A group of major industry funds has written to Treasurer Josh Frydenberg and financial services minister Jane Hume, claiming that forced disclosure of the value of unlisted assets held in their portfolios would not be in member best interests.
The letter, written by the chief investment officers of 12 funds including AustralianSuper, HESTA and UniSuper, outlines concerns that new rules around the disclosure of unlisted asset values could expose commercially sensitive information that would put funds at a disadvantage going into a transaction.
The proposed regulations form part of the government’s recently introduced Your Future, Your Super reforms, which had a rocky passage through Parliament after being criticised by many prominent leaders in the super industry.
UniSuper chief investment officer John Pearce told InvestorDaily that while the fund supported increased disclosure of portfolio holdings to allow members to make easier comparisons between funds, regulations had to approach the issue in a balanced way.
“We are totally supportive of the principle of more transparency, but we need to strive for the level of transparency that allows a reasonable person to make an informed decision, and at all times not compromise financial outcomes for members,” Mr Pearce said.
Industry funds were criticised by some in the Coalition for their heavy reliance on unlisted assets during the COVID crisis, which was reported to cause liquidity issues for some funds that were hit hard by redemptions as a result of the government’s early access scheme.
Liberal backbencher and former FSC policy manager Andrew Bragg has referred to the funds’ preference for unlisted assets – which has been a key contributor to their strong long-term performance – as “the ‘illiquidity premium’, a reward for the risk funds are willing to adopt when they buy these lumpy assets that are hard to sell”.
While parts of super fund portfolios that are deemed commercially sensitive have previously been exempt from disclosure requirements, the new rules aim to remove this exemption on the basis of increasing transparency for members.
However, Mr Pearce said a more practical option would be for funds to disclose a valuation range for the assets twice a year, a practice that has already been implemented by the sector’s largest fund, AustralianSuper.
“As currently drafted, the new requirements would result in disclosure of commercially sensitive information, and that’s not in members best interests,” Mr Pearce said.
“We are supportive of disclosing – with a lag – the historical price range of unlisted assets, as per the AustralianSuper model.”
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