Super disclosure rules should apply to all market participants

The superannuation portfolio holdings disclosure regime will disadvantage the super industry because it does not include all market participants, including the future fund, according to the Association of Superannuation Funds of Australia (ASFA).

ASFA said Australian super funds needed to compete on a level playing field as competing institutional investors in global markets were not subject to this disclosure.

“To compel the trustees of Australian superannuation funds to disclose information that does not have to be disclosed by other investors represents a material distortion of the market,” ASFA said.

The Future Fund would be excluded from the regime, as ASFA noted the stated underlying policy rationale for exclusion of the Future Fund was:

• Publishing details about holdings could compromise the ability to implement investment strategies;
• Given the funds under management (FUM), any compromise could have a significant impact;
• Disclosing commercial information was a risk to investment managers’ effective engagement – would have less access to information from investment managers than normally would be expected;
• There is a significant likelihood of
  
  • Negative effects on investment outcomes;
  • Reduced access to investment opportunities;
  • Prejudicing investment managers in their dealing with other market participants;
• Disclosure of investments could make the disclosing investor less attractive as a client; and
• Given
  
  • The growing size and complexity of the investments being managed; and
  • Competing institutional investors in global markets generally are not subject to this disclosure there is significant value and public benefit in being able to compete on a level playing field.

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“All of these statements apply equally to Australian superannuation funds,” ASFA said.

“Given this, there is a need to ensure that superannuation portfolio holdings disclosure does not compromise the ability of superannuation funds to implement investment strategies, risk investment managers’ engagement, produce negative effects on investment outcomes, reduce access to investment opportunities or make Australian superannuation funds less attractive as clients.”

ASFA said the disclosure would be available to all market participants, placing Australian super fund trustees and a material disadvantage when investing.

“All other investors, domestic and global, will have detailed information about the investments of Australian superannuation funds that other investors in the same market are not required to disclose,” ASFA said.

As a direct result of portfolio holdings disclosure, ASFA said Australian super funds would:

• Be denied the opportunity to invest in particular investments, such as private equity;
• No longer be able to invest directly in unlisted assets but be forced to invest through third parties;
• Be forced to disclose a ‘reserve price’ for unlisted assets, thereby reducing gains on their disposal;
• Disclose the price of futures contracts, which undermined the position of the fund;
• Disclose the amount of outstanding hedges, that may affect pricing and liquidity. This will have an adverse effect on the investment returns to members – clearly not in their best interests.

“ASFA supports the objective of superannuation funds transparency. It is important, however, that this is done in the best interest of fund members,” ASFA said.