Super funds anxious about unlisted portfolio disclosures

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

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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.

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the fox is among the chickens now and watch them run!

Oh no.....The Industry super funds will need to be fully transparent and fully disclose all assets and the true value of those assets?????
How will they survive when they need to be honest and post their true the pair indeed!

Why would you list the book value? This could be 5 years old, or more.

Because the book value will show how much they have actually inflated the price to today. So entered at book value 5 years ago for $1, now using a value of $2, shows that the valuation might be aggressive.

I understand your comment, and yes it could be correct. But I also wonder about the opposite. For example a SUPER fund buys a private company; and in a GFC it almost stops trading and the real value falls to $1.

I think that will make it even more apparent. They are forced to both publish and REVIEW Book Value and take write downs if necessary. If the company you refer to is worth 50c, then they must take the write down, whereas currently they may just keep at $1. Mark to market causes other problems like it did in the GFC for some borrowers so its not perfect either and valuation is always open to abuse.

Anyone with an ounce of financial acumen knows the ASFA submission is nonsense (therefore perhaps they are banking on the fact that it is directed to politicians who clearly have no clue at all).

The ongoing 'valuation' of an asset has little effect on the eventual sale price. Likewise the insane logic of the submission is only valid if it assumes that all unlisted assets in these funds are facing an imminent sale, as opposed to assets that are likely to be held for a period of time.

Dodge, duck and weave and do anything to avoid the truth or transparency yet again. There should be one overall governing rule on financial reporting that is applicable to all and every retail or industry super fund.

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