AIST Response to Superannuation Portfolio Holdings Disclosure consultation

In brief: AIST proposes specific changes to the Regulations to ensure disclosure does not prejudice members best financial interests. AIST calls for the value of unlisted assets to be disclosed within overlapping price dollar ranges and for the removal of further elements of derivative disclosure.

Summary of concerns

If implemented in its current form, the disclosure regime will create the following adverse outcomes that will negatively impact financial outcomes for super fund members:

• Disclosing the precise value of unlisted assets will advantage foreign buyers (who aren’t required to disclose specific values) over Australian superannuation funds – this may increase foreign ownership of these assets over time and jeopardise Australian jobs
• The precise disclosure makes Australian superannuation capital less attractive to investment partners and reduces access to investment opportunities
• Australian superannuation funds will be prevented from maximising the sale price when they are selling an unlisted asset as buyers will have information on the vendor’s current carrying value
• Foreign buyers will have an advantage when they are bidding for other assets in the same market as those held by Australian superannuation funds as they will have a clear signal of value
• The precise value disclosure will have a negative impact on the carrying value of assets held by Australian State and Federal Governments where interests are held alongside Australian superannuation funds
• Precise disclosure may lead to opportunistic sale approaches with public/shareholder pressure to sell the asset at the disclosed value
• Under the proposed derivates disclosure, a hedge fund would be able to use disclosed information against an Australian superannuation fund, adversely effecting pricing and returns

Background and approach

AIST appreciates the opportunity provided by the Government for additional consultation on portfolio holding disclosure and is responding to this opportunity by making a response focused on a few key points.

AIST supports portfolio holdings disclosure and a consistent regulatory framework within which this can occur (including in relation to unlisted assets and derivatives), provided it is done in a way that does not prejudice members best financial interests.

This response is intended to be read in conjunction with the submission AIST made on the Your Future Your Super Regulations and associated measures on 25 May 2021, and the 23 July 2021 letter to the Treasurer and Minister for Superannuation co-authored with the Chief Investment Officers of twelve major superannuation funds. A copy of that letter is attached – see Appendix A.

On behalf of the superannuation fund members of AIST, and following extensive consultation with them, AIST has consistently argued for a level investment playing field that enables Australian super funds to compete for the best investment return for their members. In particular, we call upon the Government to ensure the Regulations are structured so as to:

• reduce the risk of negative impacts on investment outcomes,
• not reduce access to investment opportunities, and
• not prejudice Australian superannuation funds in their dealing with other market participants or otherwise make superannuation funds less attractive as investors.

While we recognise that the Government has outlined further changes to the proposed regulations (including in relation to derivative disclosure), this submission identifies ongoing concerns with aspects of unlisted asset and derivative disclosures that are not in members best financial interests and that should be reviewed as a matter of urgency.

Read the full submission in the attachment below.