Revalue unlisted assets more frequently – super funds told
Because the unlisted assets held by superannuation funds are not subject to daily pricing, trustees are currently walking a fine line in determining what is equitable, transparent and defensible in terms of both their members and the regulators, according to major consultancy, Willis Towers Watson (WTW).
The WTW analysis argues that, in circumstances as volatile as is currently the case, superannuation funds should be revaluing their unlisted assets more frequently “as significant value swings are likely to occur while there are large numbers of transactions across their membership accounts”.
“In periods of significant market volatility, unlisted asset valuations are problematic. We saw asset owners dealing with this quandary during the global financial crisis (GFC), so it’s not a new complication,” WTW senior investment consultant, Nick Kelly said. “But what may surprise, is that there’s very little consistency in the way super funds and other unlisted asset owners manage the valuation process.”
“What do trustees and executives need to consider? It’s a particularly important question, given that regulators will undoubtedly ask about what process they’ve adopted,” he said in an analysis released this week.
“The intractable conundrum of the super fund fiduciary is maintaining a medium- to long-term time horizon of the entire investment portfolio, while members have the ability to ‘switch’ on a short-term basis. Within that Gordian knot, unlisted assets play many valuable roles; however, because they remain without a daily assessment of their value, trustees are walking a fine line in determining what’s equitable, transparent and defensible.”
He notes that trustees and executives remain responsible for the unit prices struck. “Member switches or redemptions have already begun and are taking place more frequently, but for the most part, valuation changes are yet to flow through to unit prices. Regardless of what valuation a fund or institutional investor gets from its investment manager, trustees and executives remain ultimately responsible for the unit price they strike for members and beneficiaries.”
Recommended for you
Tribeca Investment Partners has made a distribution hire from Australian Ethical in a newly-created role focused on the national intermediary market.
Asset managers may be urged to diversify their product ranges, but investment executives have warned any M&A deal should avoid simply filling gaps and instead consider long-term value creation.
Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equity firm.
Fund managers are entering 2025 with the most bullish sentiment since August 2021 and record high allocations to US equities, thanks to the incoming Trump administration.
