The regulator wants to tighten the governance standards of super funds to insist on more timely revaluations of unlisted assets to protect new members.
Mr Costello said problems for super funds in valuing illiquid assets stemmed from their provision of a daily “unit price”, allowing new and old members to trade in and out of a fund at a market valuation.
In its investigation of valuation standards, APRA could examine potential conflicts of interest if new investors buy into a fund with an artificially inflated valuation, and are hence penalised on the cost of new units, as retirees withdrawing money reap the advantages of full valuations.There are also questions about incentives for fund managers in super funds, who are paid more when they deliver high returns.
It also wants more focus on the “impact on portfolio quality of an increasing proportion of illiquid assets and the cost of restoring the portfolio quality” if it is hit with a market correction.APRA is consulting on the guide, known as SPG530, and industry submissions are due on March 17.
But APRA wants funds to demonstrate how the valuation methodology of investments that do not have a quoted market price is determined. Super funds are being urged to engage in the APRA consultation or risk more heavy-handed measures if a consensus cannot be reached.
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