The prudential regulator has proposed that superannuation funds complete a stress testing program annually after finding it, along with valuation and liquidity management practices, needed improvement.
The Australian Prudential Regulation Authority (APRA) released its revised standard on investment governance practices for consultation that identified enhancement opportunities.
It said some registrable superannuation entity (RSE) licensees lacked formal stress testing processes, and in some cases, results were not incorporated into the investment decision making process.
APRA proposed that an RSE licensee’s comprehensive stress testing program must be completed at least annually, and include at a minimum:
APRA also proposed additional requirements to enhance RSE licensee valuation governance practices including:
On liquidity management plans, APRA proposed it must:
Amid a challenging market environment, three super fund CIOs have warned against ‘jumping at shadows’.
The professional body is calling for the annual performance test to transition to a two-metric test, so it better aligns with the overarching duty of super fund trustees to act in the best financial interests of their members.
AustralianSuper, Rest, and HESTA agree on the need to retain and enhance the test, yet they differ in their perspectives on the specific areas that warrant further refinement.
Australia’s second-largest super fund has confirmed it is expanding its presence in the UK following significant investment in the region.
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