Australian superfunds forced to disclose unlisted asset values under new law

Australia’s superannuation funds will be forced to disclose the value of their unlisted assets and investments under a new bill that was tabled in federal Parliament this week.

The Treasury Laws Amendment (Your Future, Your Super) Bill 2021 was tabled by the government for the first time on 17 February.

The package of measures is more commonly known as Your Future, Your Super, and has come under fire from the superannuation sector for having the potential to hinder its ability to invest in unlisted assets.

An amendment to the bill on Wednesday will alter existing portfolio holdings disclosure rules, which generally require superfund trustees to publish information about their disclosable investment items on their website.

However, the superannuation industry secured an exemption to this as part of a previous reform package in 2019, which meant that up to 5 percent of investment items in each superfunds’ investment options were exempt from the disclosure requirements, if they are commercially sensitive and making the information public would be detrimental to members’ interests.

This has enabled funds to keep private the values of unlisted assets such as infrastructure and property.

The new amendment removes this exemption. An explanatory memorandum from the Treasury states that this “increases transparency in the superannuation system and empowers members to make fully informed decisions about their retirement savings”.

Other reforms that were previously flagged include: the stapling of superannuation funds so that an Australian worker’s default fund will follow them through their working life unless they switch to another via a portal run by the Australian Taxation Office; a new comparison tool which will rank superannuation products on a quarterly basis by fees and investment returns; and comparative benchmarking to be carried out by the Australian Prudential Regulation Authority, which will bar funds deemed to be underperforming from accepting new members.

The comparison tools have come in for most of the criticism, with industry players concerned that they will encourage short-termism to focus on quarterly return benchmarks. It could also lead to funds focusing more on listed assets instead of unlisted investments as a result, some fear.

The new amendment requiring further disclosure is likely to draw further criticism from parts of the sector, although it does bring Australian funds into line with similar disclosure regimes in place in other jurisdictions, such as Canada, the UK and the US.

Industry Super Australia is a lobby group representing not-for-profit industry superfunds. ISA chief executive Bernie Dean said in a statement on Thursday: “We’re disappointed that sensible feedback from across the sector has been ignored to this point and will further examine the concerning regulation making powers that have been added.

“Ultimately we’d like to see the Parliament enacting changes that will deliver members more.”