Super X-ray Vision – The Power To See What You’re Invested In
How much do you really know what your super fund is invested in? Good news is that you finally have the ability to see through to what assets you own in your super fund.
Written by Victoria Kent, Senior Investment Specialist
Photo by Efe Kurnaz on Unsplash
This information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.
You would think you have a right to know what you are invested in, right? Believe it or not, it’s been at the discretion of your super fund and trustee to disclose or not. Up until very recently, seeing through to your underlying investments required X-ray vision.
It all changed in November 2021, when Portfolio Holdings Disclosure regulations came into effect as part of the broader Your Future Your Super reforms. This latest development mandates portfolio transparency and prescriptive disclosure criteria i.e. The way the information is displayed to members.
Under the new regulation, super funds will be required to first report their holdings by 31 March 2022, with portfolio holdings disclosure to occur every six months thereafter.
So, what’s the big deal?
This is a win for systemic transparency and efficiency. Here at Elevate Super, we have always been proud nudists, which is why we have always disclosed portfolio holdings. This is because we believe you have a fundamental right to know where your money is invested. And credit to the other super funds who were also transparent when it wasn’t mandated (shout out to Future Super).
However, a review by the government (The Cooper Review) found on the whole, portfolio disclosure in Australia was unduly opaque and embarrassingly did not meet global best practice.
“The Australian superannuation system is characterised by a lack of transparency, comparability and, consequently, accountability.” – Super Systems Review Final Report
Trustees of superannuation funds are required to act in the best financial interests of their members. Until November 2021, weaknesses in the transparency framework governing trustees and in particular, superannuation entities, meant they did not have to provide sufficient detailed information on how member’s money was being allocated.
This governance gap failed members, as it meant super funds could hide where they invested your money.
Why is portfolio disclosure important anyway?
Failure to provide detailed portfolio information limits the ability for all market participants – including researchers, financial advisers, and investors – to have a clear, comparable, and complete picture of the superannuation investment market.
This is particularly concerning given the compulsory nature of superannuation.
If a portfolio is not disclosed fully, or at all, we would describe it as lacking transparency.
A lack of transparency makes it harder for engaged members to compare products and identify the best-performing funds. This suppresses competitive pressure on the demand side.
The lack of disclosure can also mean not knowing which industries an investor is exposed to; making it all but impossible to determine whether a particular portfolio aligns with their values.
The legislative instrument enabling this Portfolio Holdings Disclosure legislation is compatible with the human rights and freedoms declared in under the Human Rights (Parliamentary Scrutiny) Act 2011.
It is just that important.
What now?
The regulations detail how portfolio holding information should be organised and displayed to members.
Under the requirements, superannuation funds must disclose information about the identity, value and weightings of their investments on their websites. For example:
Portfolio Disclosures must be easily accessible, understandable and downloadable in order for members to compare accurately.
The regulation aims to strike a balance between the legitimate interests of members, and potential commercial downsides the industry may face as a result of disclosure.
If you are dissatisfied with the asset classes or industry exposure of your current investment option, you can switch to an alternative investment option, or a different super provider altogether. The power is yours.
Go on, pop the hood of your investment portfolio; see what it’s invested in, make sure you are satisfied, and if not, change it up.