Super portfolio holdings regime risks unintended consequences
The Australian Securities and Investments Commission's (ASIC's) consumer testing of proposed portfolio holdings disclosure arrangements may not have been robust enough to reflect what will prove to be the working reality.
The Association of Superannuation Funds of Australia (ASFA) has expressed concerns about the portfolio holdings disclosure regime, using a submission to Treasury to point out that its members hold concerns about the value of the data being prescribed for consumers.
Further it said it was unclear as to whether the prescriptive nature of the regulations meant that trustees were unable to go beyond the requirements.
"We submit that funds should have the flexibility to enhance their portfolio holdings disclosure, over and above the minimum, base-line, standards prescribed under the legislation, if desired," the ASFA submission said.
It said that while the broad concepts were confirmed in ASIC's consumer testing of the proposed new portfolio holdings disclosure regime, "in practice the sheer volume and complexity of data disclosed will prove to be dramatically different to the relatively simple concepts which were tested".
"Members are of the view that, if consumer testing were performed utilising more realistic prototypes, the results would play out differently. Furthermore, the various gaps in data will not aid comprehension or comparability," the ASFA submission said.
It said that while delayed disclosure would assist, members were concerned that there might be some adverse implications which might result from requiring this level of disclosure, which ultimately would be detrimental to members.
"By way of example, to improve control, transparency and flexibility (to protect members' interests) funds often holds assets directly in their name under Separately Managed Accounts, which are then managed by external investment managers," the submission said. "As these are 'associated entities' this will necessitate disclosure of the underlying assets."
"Some investment managers have serious concerns about disclosing their positions (for example, trend followers who have large futures exposures which necessitate short term trading strategies) which may result in these managers insisting on managing the fund's mandates through their own vehicles and the members of the fund would lose the benefits of having Separately Managed Accounts."
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