Shift to altern assets fuel valuation concerns: APRA
Friday, 3 July 2009 10:50am
Rising levels of alternative assets has exacerbated concerns over valuation policies for unlisted assets, according to APRA's latest Insight report.
The biggest problem for the regulator is fund reporting cycles being much more frequent than asset valuation cycles.
"A significant concern relates to the mismatch arising when assets that are infrequently traded and re-valued are included in funds with significant turnover that must be valued more frequently."
Alternative asset weightings for not for profit super funds jumping seven-fold in the last decade, according to Rainmaker, mean the problem is not going away.
"The increasing level of investment in unlisted assets over the last few years has exacerbated this concern," noted APRA.
Despite concerns over these issues, APRA said "it is not [their] role to prescribe valuation methodologies, trustees are expected to value assets at net market value using appropriate valuation approaches."
The regulator is instead directing funds towards the IFSA and AVCAL (Australian Private Equity and Venture Capital Association) guidelines as the latter in particular has been dealing with these challenges for decades.
Following perceptions over valuations, several industry funds have begun significantly marking down some of their unlisted valuations.
Heat may however be dissipating from the tribal warfare between the super fund segments over the question of valuations as recovering equity markets and conservative valuations of unlisted assets combine to crush the gap between not for profit and retail funds.
For example, according to the May 2009 SelectingSuper performance figures, not for profit funds are averaging twelve month returns of -16.3 per cent while corporate master trusts are only 100 basis points behind on -17.3 per cent.
SelectingSuper reports that one year ago the gap was 400 basis points.
Alex Dunnin
