According to a recent submission by the Association of Superannuation Funds of Australia (ASFA), the current performance test could inadvertently constrain investment allocations. They suggest a careful reassessment to prevent this outcome and ensure that the test supports broader, long-term investments.
ASFA also cautions the Australian Securities and Investments Commission (ASIC) against excessive regulation in the realm of private markets. The association emphasises the need for balanced oversight that does not hinder the innovative investment practices emerging in these sectors.
The association highlights the issue of tracking error budgets, which funds must manage to align with performance benchmarks. They note the particular impact on assets poorly represented by existing benchmarks, such as unlisted investments and innovative sectors like the energy transition infrastructure.
For 'greenfield' projects in infrastructure, private equity, and non-residential housing, initial capital expenses could result in early underperformance relative to benchmarks. ASFA underscores the importance of acknowledging this dynamic in regulatory frameworks.
ASFA asserts that potential reforms should take into account the industry's evolving investment governance and decision-making practices, particularly in private markets. They warn against regulatory overlap that might complicate proceedings or detract from the primary focus of delivering member returns.
