Ross Jones
The Australian Prudential Regulation Authority (APRA) has continued to issue cautionary signals with respect to superannuation funds allocating towards alternative investments.
The regulator’s deputy chairman, Ross Jones, used a speech to the Investment and Financial Services Association to repeat earlier APRA warnings with respect to trustees seeking higher returns by accepting more risk.
He said changes to the superannuation industry brought about by choice of fund and portability of benefits would likely increase competition between funds and increase pressure on trustees to outperform their competitors.
“This is highly desirable in the first instance. However, a consequence is that trustees may feel they need to take on more additional risk in investing their fund’s assets,” Jones said.
“Trustees seeking high returns may be willing to accept higher risk by investing more of their fund’s assets in alternative asset classes such as private equity and hedge funds, or by investing in different countries and products, perhaps without a full understanding of these assets,” he said.
Jones said it was not up to APRA to determine whether such assets were appropriate investments, but that the regulator would be concerned if its reviews showed inadequate understanding on the part of trustees of the risks they assumed and which members were expose to.
