Proposed new portfolio disclosure holdings arrangements for superannuation funds could undermine the investment approach of industry and retail superannuation funds heavily exposed to direct and unlisted investments.
The proposed new requirements would force superannuation funds to disclose the book value of those assets and the Association of Superannuation Funds of Australia (ASFA) has warned the Treasury that this poses real problems for a number of its members.
The issue will resonate with critics of industry funds who have suggested that their heavy exposure to unlisted assets has disguised the true value of their investment returns.
In a submission filed with the Treasury late last month, ASFA said members “have serious concerns about disclosing asset valuation details for private assets”.
“Publishing the latest valuation of large illiquid assets may limit the ability to achieve a competitive price on sale,” the submission said.
“With respect to unlisted (direct) assets, disclosure of the book value will put the superannuation funds at a material commercial disadvantage with respect to all other participants in the market, who do not need to disclose such information,” it said.
“This will have a deleterious effect upon the investment returns of members of those funds.”
The submission said that it was important to note that no other business entity in the markets was subject to similar disclosure requirements.
“This places superannuation funds at a considerable disadvantage and represents a considerable distortion of the market. In addition, members also have concerns around existing non-disclosure agreements, such as some private equity, hedge fund, joint venture and co-investment arrangements,” the submission said.
