One of Australia’s largest pension funds, Hostplus, has voiced scepticism over proposed regulatory measures aimed at increasing the valuation frequency of unlisted assets.
Chief Executive David Elia contended that the current regulatory focus on more frequent pricing may be impractical, particularly for large-scale infrastructure investments.
The discussion arises as the Australian Securities and Investments Commission (ASIC) investigates whether private markets require additional oversight.
With one-fifth of the country’s A$4.1 trillion ($2.5 trillion) pension system allocated to unlisted investments, ASIC is considering the implications for data transparency and potential investor risks.
Concerns Over Valuation Frequency in Private Markets
Elia addressed the issue during the Australian Financial Review Business Summit in Sydney, expressing doubt over whether frequent valuations of long-term assets were feasible.
He specifically questioned whether it was realistic to price assets like Sydney Airport on a daily basis, arguing that institutional investors already have defensible and established valuation methods.
According to Elia, regulators are attempting to resolve an issue that “can’t be solved” through increased oversight. His remarks follow the publication of an ASIC discussion paper exploring the decline of public listings, the growth of private market investments, and the influence of major pension funds in reshaping investment trends.
Hostplus, which manages A$115 billion for over 1.8 million members, has 40% of its default savings option invested in unlisted markets. This shift reflects a broader industry trend, as superannuation funds increasingly allocate capital to private credit, infrastructure, and private equity.
Regulatory Review and Industry Implications
ASIC’s review comes amid rising concerns that some pension funds are not valuing private assets frequently enough, raising potential issues of transparency and investor protection. The regulator is examining whether current valuation practices provide an accurate reflection of asset values, particularly during market fluctuations.
The discussion paper also highlights the widening gap between public and private markets. While public listings have declined, private investments have surged, largely due to the flexibility and long-term growth potential they offer institutional investors.
However, ASIC has raised concerns about data accuracy, warning that inconsistent valuation methods could obscure financial risks.
Industry stakeholders have been invited to provide feedback on the discussion paper, with ASIC accepting responses until April 28. While some support tighter regulations to enhance market transparency, others, including Hostplus, argue that overregulation could hinder investment strategies and place unnecessary burdens on funds managing long-term assets.
The outcome of ASIC’s review is expected to have significant implications for Australia’s pension system, particularly as superannuation funds continue to expand their presence in private markets.
