“For many parts of the world, it’s deemed as a basic right of an investor to know what they’re invested in,” says Milliman insights director Amara Haqqani.
“Somehow in Australian funds culture, we default to assuming that investors have given up transparency by handing over their money to the professionals.”
Local super funds have come up with a multitude of excuses to keep a veil of secrecy over their investments.
The chief executive of a fund with more than $100 billion in assets recently told me it was too expensive to go down the road to full disclosure. It also would provide members with so much information that they would likely become overwhelmed and confused, they said.
These excuses simply don’t pass the pub test. The super industry arguably has the easiest business model in the world – government-mandated contributions mean rock-solid cash flow.
Trustees need to do much better to ensure members know where their money is going.
This month’s federal budget included important reforms to make super funds more accountable and transparent. A cohort of Liberal backbenchers would like this to focus on money paid by industry funds to unions. But the wider public is increasingly waking up to the fact that they are investors via their super funds. And now, more than ever, they want to know what companies they are backing.
Before The Age and Herald reported that construction fund Cbus had a stake in the proposed open cut coal mine near Gunnedah, local farmers thought it was exclusively owned by a Chinese conglomerate. Now, they are mounting a campaign to encourage the fund to step up pressure on the company that may be a threat to ancient Aboriginal artefacts and damage groundwater.
Only AustralianSuper publishes its full holdings in an online database. Fund members, or anyone else who is curious, can search the database to find out what stake the super giant has in companies and projects all around the world. The holdings are updated every six months, with a time lag to avoid publishing market-sensitive information.
“They don’t just set the standard, they are the gold standard,” says Rainmaker’s lead researcher Alex Dunnin.
Beyond AustralianSuper, the industry largely operates in the dark. Funds often outsource money management to investment firms. Even fund trustees sometimes don’t know where their members’ money is going.
Analysis by Rainmaker found that just 27 major super funds – one quarter of the largest industry players – publish investment holdings data at all.
Seven funds publish the entire list of companies in which they own shares. Most only list the top-20 or top-10 holdings, according to Rainmaker research. Even fewer funds publish property, infrastructure, fix interest and cash holdings.
The retail super fund sector, including funds by listed wealth companies and big banks, are missing in action.
“It’s largely been ignored by the retail sector,” Mr Dunnin says. “Sure, not telling [members] is within the law, but it still doesn’t make sense.”
The 2009 Cooper review into the super system labelled our retirement industry as “unduly opaque” when it comes to portfolio holdings. It recommended funds publish complete holdings every six months. Eleven years on, the man behind the review, Jeremy Cooper, says progress has been slow.
“There has been quite a lot of noise and push-back on something that ought to be an expected matter of course,” Cooper says. “All that information should be there at a click of a button.”
The time has now come for super funds to be upfront with members about how their money is spent.
Charlotte is a reporter for The Age.
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