Mar 21, 2023
Watchdogs Target Private Valuations at Pensions in Wake of Chaos
(Bloomberg) -- Australia’s regulators have warned the A$3.4 trillion ($2.3 trillion) pension industry that they’ll be keeping a closer eye on funds’ reporting of unlisted assets in the wake of market upheavals caused by the sudden banking crisis.
The Australian Securities and Investments Commission and the Australian Prudential Regulation Authority will be monitoring the valuations provided by so-called superannuation funds, officials told an industry conference in Melbourne on Wednesday. Pensions are among the country’s biggest investors and are required to publicly disclose their overall holdings only every six months.
“We think that trustees should be much more proactive, given the state of the markets, and really be considering what you should be doing to make sure that your valuations are not stale,” said Katrina Ellis, APRA’s general manager of superannuation. “If you’re constrained by your policies on-out-of cycle valuations, we think that’s something that you should look at because I think the turbulent markets are going to continue.”
Australia’s retirement funds have in recent years ramped up their holdings of private assets locally and abroad, which can be harder to sell and are subject to less frequent revaluations. About a quarter of global pension holdings are made up of alternatives such as private credit and infrastructure compared with 7% some two decades ago, according to consultancy Willis Towers Watson.
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While the industry suffered its worst returns since the global financial crisis last year, it was partly buffered by gains in unlisted assets. It’s as yet unclear what the market ructions sparked by the collapse of Silicon Valley Bank and the rescue of Credit Suisse Group AG will have on superannuation funds, which invest compulsory contributions by Australian employers on behalf of their employees.
“The unlisted assets base is really critical to get right, and we need to make sure that in volatile markets, things have been looked at,” ASIC Commissioner Danielle Press told the panel, adding the regulator expected funds to go into more detail in their next round of disclosures, given the “banking issues we’ve seen recently.”
“Things like convertible bonds, how funds are disclosing those in their portfolio holdings,” Press said. “We’d be expecting that the trustees are actually looking at that for the next reporting period and making sure that their classification is in fact still right.”
APRA last week said it was monitoring the banking situation “closely and is gathering information to fully understand the impact on Australian superannuation funds and their investments,” in an emailed statement.
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