Australia's portfolio disclosure rule pushed back again

The new system was supposed to come into effect on July 1, 2013, but the deadline was pushed back by 12 months to give the industry time to adjust. Following a re-opening of the consultation process, there was another 12-month deferral. The Australian Securities & Investments Commission has now announced a further delay, resetting the deadline to July 1, 2016.

The disclosure requirements, which apply to all superannuation funds, emerged as part of the broad review of Australia's financial services sector in the wake of the global financial crisis. Recommended reforms included a removal of the complexity and opacity surrounding investment products, with more information on superannuation funds' processes and holdings put into the public domain.

While PE industry participants do not oppose greater transparency in principal, there are concerns about the practical implications. Super funds would have to post twice-yearly statements naming not only the funds in which they are invested but also the assets of each fund. This goes a step further than some US public pension funds, for example, which only disclose the fund and manager. 

Domestic GPs would have little choice but to comply. Overseas managers, however, may refuse to do business with super funds in order to avoid this level of disclosure. A number of US venture capital firms have severed ties with US LPs that gave out fund performance information as a result of Freedom of Information Act requests - although most states now prevent the compulsory disclosure of confidential commercial information under this legislation.

Some super funds responded to the impending regulatory change by requesting side letters for new commitments to GPs entitling them to disclose the relevant information if and when necessary. It is understood that fund formation counsel have advised their GP clients not to acquiesce, citing confidentiality arrangements in limited partner agreements.

Various industry bodies have engaged with regulators on the issue. Subsequent to last year's deferral, the Australian Private Equity & Venture Capital Association (AVCAL) made an additional submission to the government in which it proposed two alternative approaches: only disclosing investments above a meaningful threshold; only disclosing fund-level information. Under either scenario, it cautioned that a carve-out for commercially sensitive information would likely be required.

"The introduction of the regime - in the form currently proposed - will negatively impact on the capacity for superannuation funds to maximize the returns they generate for their members, and at the same time will impose significant new compliance cost obligations which will ultimately be borne by fund members," AVCAL added.

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