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Liquidity still an issue for funds
Liquidity remains a problem for a number of superannuation funds despite the strong recovery in investment markets over the past 12 months, according to the Australian Prudential Regulation Authority (APRA).
APRA has used its annual report to describe liquidity management as “a lingering problem for some funds … arising from frozen investments in a number of managed investment schemes".
The regulator said another set of issues had arisen with respect to the valuation of unlisted assets, such as private equity, direct property holdings and infrastructure investments, to which some funds have significant exposures.
“The absence of ready benchmarks that provide a regularly updated measure of the market value of such assets can lead to outdated and inappropriate valuations and equity issues between incoming and exiting members, particularly during periods of high asset price volatility,” the annual report said.
“APRA has written twice to trustees on this matter, most recently in August 2010, emphasising that trustees should have a strong governance framework for valuation of unlisted assets, should give due consideration to equity issues between members and should be mindful of the inherent valuation risks associated with investments that have multiple management layers, complex investment structures and/or underlying assets that are opaque in nature,” it said.
AUTHOR
Mike Taylor
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