SUPER EXECUTIVES SWITCHING IN CONFLICT

www.fssuper.com.au

Volume 13 Issue 04 | 2021 News

7

OnePath tops Fat Cat super fund list

Karren Vergara OnePath has toppled AMP to become the worst-performing superannuation fund based on Stockspot’s annual ranking.

In analysing some 600 multiasset investment options offered by 100 super funds, OnePath took the gold prize as the overall worst performer after taking into account fees and peer comparisons over a five-year period.

AMP came in second place with the silver medal, followed by MLC, Zurich and EISS Super, which came equal third with the bronze medal.

Among its worst performers, OnePath’s OptiMix Balanced, Managed Growth and Active Growth filled the top three worstperforming aggressive growth funds category.

In the balanced fund category, Zurich’s Capital Stable, and OnePath’s OptiMix Conservative and Conservative performed poorly for members, returning between 2.5% and 2.7% per annum.

As for the overall best performers, UniSuper and Qantas took out the gold medal.

“We found that simple indexed options outperform over 90% of all super funds. Many superannuation funds hire so-called “expert” investment consultants to pick a range of active fund managers to invest their members’ retirement savings,” Stockspot said.

“Unfortunately, these investment consultants and active fund managers take a nice big juicy fee from your super but rarely outperform a basic index that tracks the market. In fact, over the last five years approximately one in 10 super funds were able to beat the index fund with similar risk (after fees and taxes).” fs The quote

What we found [instead] was often a clear failure to identify investment switching as a source of potential conflict...

Super executives switching options in conflict: ASIC

Elizabeth McArthur

ASIC has released the results of surveillance into investment switching by super fund executives during market volatility at the start of the pandemic, finding possible conflicts of interest.

ASIC looked at a sample of 23 trustees (including trustees of industry and retail funds) and focused on conduct during the time of increased market volatility arising from the COVID-19 pandemic.

“We expected superannuation trustees to have robust conflict of interest policies that dealt adequately with investment switching, including by their directors and executives. What we found instead was often a clear failure to identify investment switching as a source of potential conflict, resulting in a lack of restrictive measures and oversight to adequately counter this risk,” ASIC commissioner Danielle Press said.

“This is very concerning given the level of sophistication and governance required of trustees when managing millions of dollars in assets on behalf of fund members.”

The regulator found that most trustees surveilled failed to identify investment switching as a risk, resulting in a lack of controls or guidance around investment option switching.

There was significant disparity among trustees in the level of engagement by their boards on the issue of conflicted investment switching by directors and executives, ASIC said.

The surveillance found almost half of the trustees (10 of the 23) did not have preventative controls such as trade pre-approvals or switching blackout periods to limit executives’ ability to switch investment options.

And many trustees did not have mechanisms in place at all to regularly review switching activity by their directors and executives.

There was also a lack of oversight of investment switching among related parties (like a spouse or family member) within funds.

ASIC acknowledged that some trustees that did not have oversight of this issue in place at the time of the surveillance had already committed to putting oversight in place going forward. fs

Unlisted asset valuation processes largely inadequate: Regulator

Jamie Williamson

In reviewing decisions made by super funds in relation to unlisted assets in early 2020, APRA said it found that, “while RSE licensees generally reacted promptly to the crisis, few had robust, pre-existing frameworks for implementing, monitoring and reverting to regular valuation approaches following out-of-cycle revaluation adjustments”.

In communicating its findings, APRA noted that only six RSE licensees it looked at had dedicated valuation committees in place prior to the market volatility seen early last year. These funds demonstrated stronger overall governance and oversight capabilities, the regulator said.

However, instances of valuation committees headed by a fund’s chief investment officer were also identified and where the committee had the ability to determine or influence decisions, introducing a clear potential for conflicts of interest.

The regulator said funds typically demonstrated a lack of triggers for the consideration and imposition of valuation changes. There was also no monitoring processes for adjustments and no framework when it came to the alteration of valuation adjustments.

Inconsistent levels of RSE licensee consideration and action for different classes of unlisted assets were also identified. It also found that often a fund’s board and management teams dedicated time to devising processes, rather than considering and challenging valuations, and that in many instances it wasn’t clear that there were adequate board-approved valuation policies to guide any actions taken by a fund. fs