Brad Matthews (left), Andrew Fisher and Annika Bradley

The regulator’s call for quarterly valuations of Australian superannuation funds’ $650 billion held in unlisted assets is “not unreasonable, sensible and logical,’’ says Australian Retirement Trust head of portfolio strategy Andrew Fisher.

Speaking at the Professional Planner 2023 Researcher Forum, Fisher said the $230 billion fund already had a valuation review committee which met monthly to update unlisted asset valuations.

He added that an external body for all APRA-regulated funds, which had responsibility for oversight, or doing evaluations, may be a good model for every fund so the same methodology, approach and interest-rate assumptions to value unlisted assets is universally utilised.

“Our sense from engagement with APRA is they expect us to value assets on a basis that is frequent enough,” Fisher said.

“One of the challenges sometimes, particularly for smaller funds, is if you don’t directly hold the assets, that can be a little bit more challenging to get those more frequent valuations.”

Fisher added the fund has “pretty well-established” processes to ensure valuations are an accurate reflection of where they believe the market is.

“Another really good example of something where we didn’t actually have to act was the SVB [Silicon Valley Bank] case,” he said, referring to the collapse of the US-based bank that catered largely to tech industry clientele.

“Remember, that happened on a Friday and the private equity team spent all weekend thinking about what they might need to do to their portfolios… By the Monday, the regulators had stepped in to essentially back the bank and… we didn’t have any real concerns about the private equity market, but we were prepared to revalue on Monday morning if we needed to.”

Unlisted assets attracted liquidity risk premiums and ART did “liquidity fire drills” at least annually to stress tests its investments for market volatility.

“The only way to earn the illiquidity risk premium and to have those assets deliver over the long term is to be able to hold them forever, if you need to and that way, you’re never a forced seller,’’ he said.

Morningstar Australasia director of manager research ratings Annika Bradley asked if quarterly valuations were enough, particularly in volatile times, given Australians were able to transact in and out of super funds daily.

But all funds were using different valuation processes which made it hard for advisers and investors to see underlying information and issues with unlisted portfolios

“I think that APRA’s challenge is that there are different standards being applied across different funds,” Bradley said.

“In the absence of transparency, you can have the best process in the world, but without actually seeing what the outcomes of that process are, it’s very hard to mark.”