Australia delays pension fund portfolio disclosure rules

The portfolio disclosure legislation arose from a post-global financial crisis review of the country's financial sector as a whole. It recommended a removal of the complexity and opacity surrounding investment products, with more information on superannuation funds' processes and holdings put into the public domain.

The rules - which would see superannuation funds release details of their holdings, including a relative market valuation, twice-yearly on a publicly-available section of their websites - were supposed to come into force on July 1, 2013 but then deferred for 12 months to give the industry time to make adequate preparations.

Following the change in government there were calls for the mechanism to be reviewed. Another 12-month deferral has now been announced, allowing for further consultation.

While the private equity industry participants have said they support greater transparency in principle, there is general opposition to the disclosure requirements because of their practical implications.

The closest the industry has to a global standard - disclosures made by US public pension funds - stops short of naming the specific contents of PE managers' portfolios. The rationale is that the release of such information could have a detrimental impact on valuations and investment performance.

While AVCJ understands that domestic GPs would have little choice but to comply with the requirements, foreign managers would be subject to no such obligations. The concern is that some of these managers would refuse to do business with superannuation funds, potentially resulting in members being denied access to the best-performing funds.

Several superannuation funds responded to the legislation by requesting side letters for new commitments to GPs entitling them to disclose the relevant information if and when necessary. Fund formation counsel for GPs told AVCJ they were advising clients to refuse to acquiesce, citing confidentiality arrangements in limited partner agreements that specifically restrict the disclosure of commercially sensitive information.

The cost burden of compliance would also be onerous, with no guarantee that this level of disclosure actually benefits superannuation members.

"The proposed new disclosure framework would not have delivered more meaningful information to superannuation fund members - instead, fund members would have been subjected to volumes of immaterial information that would only have served to confuse them," said Yasser El-Ansary, CEO of the Australian Private Equity & Venture Capital Association (AVCAL), in a statement.

He praised the Minister for Finance and Acting Assistant Treasurer for providing much-needed market certainty by deferring the implementation date. AVCAL pledged to participate in the next stage of the consultation process and push for a disclosure regime that is comparable to that of other developed markets.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Regulation
• Australasia
• regulation
• Australia
• AVCAL