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ASFA pushes back on stricter private market reforms
The industry body has cautioned the government against implementing unnecessary regulations for private market investments with ASIC currently exploring reforms in this space.
The government must ensure that any new reforms to the regulation of private markets does not “unduly hinder” participation by super funds in this market, the Association of Superannuation Funds of Australia (ASFA) has warned in a recent submission.
In a submission to the government’s Economic Reform Roundtable, ASFA explained that superannuation funds invest in private assets as part of a holistic portfolio approach designed to deliver the best possible risk-adjusted returns to members.
“In this regard, private assets can provide particular benefits to diversified investment portfolios, which compliment investments in public assets,” the industry body said.
These assets can offer significant diversification benefits, it said, and encompass a broad range of asset classes, such as unlisted infrastructure, unlisted property, private equity, and private debt or credit.
“Each of these asset classes has distinct risk and return profiles, spanning the growth spectrum – from high-growth opportunities like private equity to mid-risk investments such as property and infrastructure, and low-risk options like private credit, depending on portfolio credit rating,” it said.
“In this regard, superannuation investments in private markets support a broad range of sectors, and business models and structures.”
With the corporate regulator currently undertaking a review into private markets, ASFA warned that undue barriers on superannuation investments in private markets, regulatory or otherwise could risk raising the cost of financing for business.
ASIC released a consultation paper earlier this year examining private markets and plans to publish new research into private credit this month.
Last month, ASIC also stated it was increasing its surveillance of private equity and private credit funds, which would help it test and address key risks.
“ASIC will provide updates to this work before the end of 2025,” it said.
ASFA said it was aware of ASIC’s current work on Australia’s evolving capital markets and the future of private markets and understood the regulator expects to announce potential reforms later this year.
The industry body stressed that any potential reforms in this area must recognise superannuation industry’s robust and improving investment governance practices and sophisticated approach to investment decision making, including with respect to private markets.
“ASIC has noted that superannuation is a mature investment force in Australia and a significant and structural influence in markets and investment,” it said.
“Potential reforms should avoid regulatory overlap and duplication of existing reporting and compliance. With APRA already applying heightened scrutiny, further regulation by ASIC may risk duplication – which would add complexity and divert resources from delivering returns for members.
“Effective coordination between regulators will support efficient oversight.”
ASFA also highlighted that it was important that businesses have a broad range of different funding mechanisms and that the superannuation sector was well-placed to provide this support.
Superannuation fund HESTA and the Financial Services Council (FSC) have previously raised similar concerns about the risks of over-regulating private markets.
The FSC said that superannuation funds and other institutional investors should be excluded from any regulatory enhancements for retail investors.
The association said ASIC should back a regulatory framework that allows super funds to invest in private markets, including private credit, as part of building diversified, income-generating portfolios.
HESTA stated that “appropriate and adequate levels of governance and information” already existed for investments in private markets and said it was essential that ASIC work with investors to understand the impact of any regulation.
“When compliance measures are not targeted or purposeful, there is material risk of over-regulation, which can diminish flexibility, diminish returns, erode investor confidence, and dampen or discourage activity in these markets,” it said.
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