Labor announced it was reviewing the test after several funds said the current rules stopped them investing in the “nation building” initiatives the government wanted them to bankroll.
Industry super power players AustralianSuper and HESTA are pushing ahead with calls for a rewrite of the rules, but other funds have started walking back theirLabor announced it was reviewing the test after several funds told Treasurer Jim Chalmers the current test prevents them from maximising Australians’ retirement nest eggs and investing in “nation building” initiatives by encouragingdid not allow them to invest in long-term trends such as the energy transition or social housing,...
The Australian property index also “created a disincentive” for funds from investing in affordable housing, as it did not factor in exposure to residential property. The country’s second-largest super fund, the Australian Retirement Trust, also told Treasury the test did not need significant reform.It said minor benchmarking changes were needed – the test did not adequately cover inflation-linked bonds and commodities, for example, and the risk of retrospective benchmark changes stymied investment in emerging and alternative assets.
“Fewer benchmarks is better than more. Ideally relative performance would be assessed against a single-metric test such as a simple reference portfolio, or a peer comparison of risk-adjusted return,” AustralianSuper said in its submission. Leaning on Dr Chalmers’ desire for nation building, HESTA’s submission said this change would “support funds to actively invest in emerging asset classes that supportIt pointed out that when super funds previously were not “constrained … relative to a backward-looking benchmark” before the test came into force, it had helped “pioneer” Australia’s infrastructure asset class.
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