Here’s rule a change from Canberra that will rattle the huge, fee gouging funds management industry to the core, and improve transparency for millions of people with super, in all types of funds, apart from those which are self-managed.
Fund managers offering super products to the public of all sizes (now called an RSE or Registrable Superannuation Entity) will be forced to reveal on their websites their asset holdings, their size and value on a regular basis, according to the final set of law changes from the Federal Government in its shake up of superannuation rules and regulations.
It means that for the first time superannuants and others (such as the nosy media, regulators, rival fund managers etc) will be able to see just what the money is being invested in and how it is changing over time.
The impact will be dramatic and moans and groans will surely emerge from the various industry associations and managers and their advisers about this ‘extra cost and burden‘ for a bunch of people paying themselves some of the fattest salaries in the land.
The proposed changes have been released for public comment and you can bet this will be one area the super industry will zero in on, claiming greater disclosure will hamper their investing plans and schemes. That’s rubbish because greater disclosure will mean these funds managers can be better held to account for their investment decisions.
ASX200 (XJO) – 10 Year Chart – How Fund Managers Ride The Market
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At the moment the move won’t start for 14 months, from July 2014 (which is a bit long to wait). The disclosures will have to be made twice a year – no more than 90 days after June 30 and December 31.
All investments in the RSE has will have to be identified and noted on the website – whether they are direct shareholdings in companies such as Telstra, the banks or retailers, or investments in products such as private equity, hedge funds, pooled property trusts and other investment vehicles here and overseas.
The move will see a flood of information available on the websites of fund managers large and small. In fact a new industry will emerge in time that collates, analyses and rates the investments and the changes in strategy of fund managers large and small. The changes are in addition to better and clear disclosure of returns and other information.
The move was contained in the latest round of regulation changes for the super industry, released on Wednesday by the Federal government. Buried in the draft regulation changes (view on treasury.gov.au website) is the "Obligation to make information relating to investment of assets publicly available". And it’s a beauty.
According to the exposure draft, it means that a new sub section will be inserted into the Corporations Act "which require the trustee of an RSE to publish information regarding the RSE’s portfolio holdings on a part of the RSE’s website that is accessible to the public at all times.
"The legislation requires that the information must be set out in a table in accordance with the regulations and that this information must be sufficient to identify each financial product or other property, and the value of the RSE’s investment in each financial product or other property.
"The trustee must publish portfolio holdings within 90 days of each reporting day. The reporting day will occur once every six months on 30 June and 31 December, and. Portfolio holdings will have to be disclosed by RSE licensees from 1 July 2014."
"To ensure the information on portfolio holdings is useful to members, it should be published separately to the financial products or other property in which the assets of the RSE licensee is invested. The specified information must be organised in two tables. The table format will comprise four columns – the name of the financial product or other property, the number of units held (if applicable), the price of the unit as at the reporting day (if applicable) and the total value invested in Australian dollars as at the reporting day.
"The first table will cover all financial products and other property except those financial products that have invested the assets, or assets derived from assets, of the RSE licensee in another financial product or other property. The information is to be presented at the investment option level and the disclosure of financial products and other property must be organised by the investment option or MySuper product to which it is attributable, or the amount of the investment that is attributable to the investment option or MySuper product.
"Where an investment in a financial product is then invested in another financial product or in other property that is required to be made publicly available on the fund’s website, the details of that financial product and the amount invested should be disclosed in a second table using the same format as above. This table should show the tiers of investment where assets are invested through several financial products before being invested in a final financial product or other property.
"In some cases, the financial product invested in by an RSE licensee will be a managed investment scheme, pooled superannuation trust, unit trust or other pooled investment scheme that then invests the assets derived from the RSE licensee in further financial products or other property. The intent of section 1017BB of the Corporations Act (to be inserted by the Further MySuper and Transparency Measures Act with effect from 1 July 2013), is that this information be disclosed, however, to ensure that the published information on a fund’s website is useful for members, a trustee should publish this information separately to the final financial products or other property in which the assets of the RSE licensee is invested (that is, the share).
"In some cases a managed investment scheme may be the final financial product that is invested in for which the RSE licensee has information. For example, an RSE licensee may invest through a managed investment scheme offshore. In this case, this information (including the amount invested) should be disclosed as the final financial product invested in within the first table.
"A person who invests assets derived from an RSE under a contract or arrangement will be required to notify any person with whom they are investing those assets that they will be required to provide the relevant information regarding the financial product to the RSE licensee so that the RSE licensee can satisfy its obligation to publish portfolio holdings.
"Any person so notified must provide information to the RSE sufficient to identify each financial product in which assets derived from the RSE are invested, and the value invested, so the RSE licensee is able to comply with its obligation to publish portfolio holdings."
The changes mean there will be a substantial lift in the amount of inflation about fund investments available to all and sundry to examine and analyse. Over time fund members and others will be able to see if balance funds are balanced and how they achieve that, if active stock pickers are really active or merely closet index huggers and if index huggers really track their stated measures (such as the ASX 200), how they do it (shares, options, derivatives etc) and how successful are investment decisions by managers.
