Submission to inquiry into Treasury Laws Amendment (Your Future, Your Super) Bill 2021 [Provisions]

Private capital fund managers invest billions of dollars into Australian companies every year. The private capital investment asset class has delivered investors an average net return after fees of 12.5 and 12 per cent per annum, over the past 10 and 20 years, respectively.1 This strong performance has provided Australian superannuation funds with superior returns and valuable diversification. In response, Australian superannuation funds have increased their investment into and alongside private capital funds. 

* 15-year average for March and June 2018
Source: Cambridge Associates Benchmark Data

The private capital industry is supportive of adopting the current proposal which would see unlisted private capital investments benchmarked against listed equities. It is important to acknowledge, however, that given the uncertainties which surround how investment decision making will be impacted over the short and medium-term by the introduction of these reforms, it would be prudent for the government to ensure the implications are monitored in real time; this includes the allocation of funds.

The Council urges the Committee to consider the merits of assessing performance on a net of ‘total fees’ basis, in line with APRA’s heatmap approach.

Some of the detail of the reforms will be contained in the forthcoming regulations. It is vitally important that the regulations are drafted to achieve the Government’s intent without imposing unnecessary costs or generating unintended consequences. For example, the portfolio holding disclosure exemption has protected member value by not requiring superannuation funds to make public commercially sensitive information, where doing so would be detrimental to the interests of members. In this instance, how the regulations balance the need for transparency with the need to protect member value will be important.

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1 Cambridge Associates, Australia Private Equity & Venture Capital Index and Selected Benchmark Statistics (Q2 2020)