Revalue unlisted assets more frequently – super funds told

8 April 2020
| By Mike |
image
image
expand image

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.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 1 week ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 3 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 1 day ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

2 weeks 5 days ago