Publishing unlisted values will erode super: AustralianSuper

26 November 2019

Superannuation fund members will end up poorer in retirement if unlisted asset values are published, according to AustralianSuper.

Speaking at the Standing Committee on Economics, AustralianSuper chief executive, Ian Silk said while almost all assets in its portfolio had published a dollar value, unlisted asset values were published only with a dollar range.

“The reason we've published a dollar range—and they're only for unlisted assets; listed assets obviously have a public market—is very similar to if a member of the committee were selling their house and had a reserve of a million dollars. You don't put that out into the market, because a buyer might come along and offer to pay $1.1 million, but, if they know the reserve is a million, they're going to be reluctant to do that; they might come along and offer $950,000, for example. That's the reason,” he said.

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“We don't want potential buyers having a market advantage that would see them act in a way that would be to the detriment of the fund's members. We're all about maximising the investment return of the fund for the benefit of the two million Australians that are members of AustralianSuper and, if we were to publicly divulge the valuation that we hold an asset at, we think that's going to be the detriment of the fund's members.”

When asked by Labor MP Dr Andrew Leigh, if members would effectively end up poorer in retirement if the figures were published Silk said “ultimately, yes; that’s right”.

Silk said the fund considered unlisted assets as mid-risk assets and viewed to hold them for the long-term.

“Many of them provide strong, stable, long-term income streams—for example, long-term leases with the Commonwealth government in a large CBD property, or an infrastructure asset where government has committed to pay a regular income stream over an extended period of time,” he said.

“They might not generate the strong outperformance of equities but, in the context of a balanced, diversified portfolio aimed to generate strong long-term returns, they're a terrific contributor.”

When IOOF chief executive, Renato Mota, was separately questioned on unlisted assets, Mota said the large part of the long-term return gap of around 1.8% between retail and industry funds was the use of unlisted assets.

However, Mota said that unlisted assets needed to be better defined as growth or defensive.

“It would be to have a consistent across-the-industry classification of what is growth and what is defensive. I think that would make a significant step forward in allowing the industry, in the first instance, to have a more educated position on some of these portfolios and, therefore, to be able to communicate that to members,” he said.

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Which simply proves the entire performance figures of Union Super Funds is a scam, as they can make it up as they go along. But the pro union fund journalist & pro union fund book promoters could care less about these facts. Something that has been discussed as well, is there needs to be more investigation into the so called "independent" firms that work with the funds that value all of these infrastructure investments. How do these external firms arrive at their valuations? Are they too close to the action with the Union funds? Is this a much bigger closed shop that needs a very careful investigation? Also, how did Hastings Infrastructure get shut down virtually overnight? Who was involved with that deal? How did that come about? The smell is getting stronger.

Yes, but who was in on it to make it happen? These things don't just happen by accident.

Then ask them to at least publish the valuation process and set standards about disclosure of this process. Also have an external independent valuer, not one regularly contracted, do a secondary and publishable valuation every year as a transparency check.

Following the example of real estate agents in price opacity isn't the greatest look, I would've thought. Silk probably should rethink this retrograde exercise. The Perth Airport "fiasco" wouldn't have been an issue if AustralianSuper and their partners had been public with their valuations.

"long-term leases with the Commonwealth government in a large CBD property" - I hope this isn't ASIC....

A valuation is a valuation (based on the assets cash flows in and out, over the lifetime of that asset). Silks comments around a buyer having a potential advantage if they know the valuation is absurd. How does that make any sense whatsoever.

If a buyer offers $950k for an asset they have valued themselves at $1m or $1.1m, then the market is at $950k and Australian Super is overstating their asset base and hence performance and HENCE, performance related fees. One superfund does not make a market!

I am very suspect of their performance numbers even more-so now. They are clearly putting up a fight over their transparency and you have to ask the reason WHY!!

I am gobsmacked at Silks comments. I have $350 in Australian super. It wont be going any higher than that.

So instead superannuation members are disadvantaged buying inflated unit values? The idea that publishing a market valuation would create some kind of advantage is ridiculous to the extreme. Can anyone find me the commercial property buying group that makes offers and pays for multi-million dollar assets without a valuation and due diligence? I have a cbd asset I would like them to buy but only if they promise not to value it before making a cash unconditional offer.

far too many unanswered questions surround their multi-billion dollar infrastructure empire

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