Super funds leverage roundtable for performance | Australian Markets

Superannuation funds are aiming to make use of the Government’s Economic Reform Roundtable to realize modifications to the superannuation performance take a look at to facilitate their investment agendas with respect to infrastructure, personal equity and residential housing.

The push for Government help to change the performance take a look at is revealed in a submission filed by the Association of Superannuation Funds of Australia (ASFA) which is arguing that it dangers the unintended consequence of limiting investment allocations.

The large superannuation group has additionally urged that the Australian Securities and Investments Commission (ASIC) doesn’t over-play its hand with respect to reforms to personal markets.

It stated that with a purpose to handle portfolios in opposition to the present performance metric, superannuation funds invest with regard to their finances for monitoring error in opposition to the prescribed take a look at benchmarks.

“While products with a relatively large performance buffer can tolerate a larger tracking error budget in the short-term all products are subject to a (sustainable) long-term tracking error budget,” ASFA stated.

It stated the results of needing to handle monitoring error on asset allocation selections are more likely to be more consequential for belongings/asset courses that aren’t well-represented by the prevailing set of benchmarks.

“This includes the broad range of unlisted assets, but particularly unlisted ‘greenfield’ investments in energy transition infrastructure, private equity and non-residential housing,” ASFA stated.

It stated that with respect to ‘greenfield’ investments more broadly – notably in infrastructure, personal equity and non-residential housing – “up-front capital costs mean that assets are likely to underperform benchmarks early in the investment cycle”.

On personal markets, ASFA stated it considers that potential reforms ought to recognise the superannuation industry’s “robust and improving investment governance practices and sophisticated approach to investment decision making, including with respect to private markets”.

“Potential reforms should avoid regulatory overlap and duplication of existing reporting and compliance,” it stated. “With APRA already applying heightened scrutiny, further regulation by ASIC may risk duplication – which would add complexity and divert resources from delivering returns for members.”