APRA calls for improved investments classification

The Australian Prudential Regulation Authority (APRA) has recommended superannuation trustees adopt a suitable classification process to ensure members can distinguish between the characteristics of each investment strategy on offer.

In a letter to trustees, APRA’s deputy chairman Ross Jones said trustees could help by ensuring that for each strategy offered the expected frequency of negative returns over a 20-year period was clearly stated.

“At present there are no standard risk descriptors and there has been no industry-wide standard asset allocation for different labels — such as balanced, conservative or growth,” he said.

“This leads to confusion on the part of fund members and makes it difficult to properly compare investment performance,” Jones added.

Jones said the brief guidance had been prepared in consultation with industry associations and the Australian Securities and Investments Commission (ASIC), and would be followed up in more detail later.

He added that the Investment and Financial Services Association and the Association of Superannuation Funds of Australia also supported the approach, and had indicated they would work with their members to develop good practice guidance that would be used to increase comparability.

APRA envisaged that regulatory guidance would be issued by ASIC in the first year of transition to the shorter Product Disclosure Statement requirements, and would take into account the requirements of APRA and joint industry guidance.