Super funds aren’t stepping away from the private assets that have driven strong performance, but they are stepping up management of the surrounding risks.
First, Australia’s super industry giants are not about to back away from their long and successful binge on private assets, including unlisted property, unlisted infrastructure private equity and credit.But amid growing questions about the accuracy of private asset valuations as interest rates rise – perhaps most prominently in the office property market – they are more actively managing private asset risks, including diversification and illiquidity.
“Funds are aware of this and are working with the regulator to ensure proper risk management and governance frameworks to mitigate that issue.” after assessing “the appropriate management of investment risk, costs, complexity, asset allocation, rebalancing and liquidity, and how these particularly relate to unlisted assets within these standalone sector options” would appear to reflect an even more active example of private asset risk management.
This can only be positive. As the sheer size of super funds and their private asset holdings rises, faster and better valuations are vital to give super fund members confidence that unit prices reflect reality.The issue here is not whether private assets are a bad investment – they clearly are not – but whether super funds are properly valuing them and managing the risks involved.
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