Industry superannuation funds continue to be questioned by regulators over aspects of their operation. The Australian Prudential Regulatory Authority (APRA) first raised concerns about the management of the funds as early as mid 2023.

There is concern about the high level of unlisted investments many industry funds hold. The Australian Financial Review (AFR) first published industry super funds’ holdings in unlisted assets in April 2023. Unlisted assets are not traded on any liquid market.

That means their value isn’t transparent and cannot be determined with certainty. A good example is Sydney Airport. What is it worth? It is part of the retirement savings of the members of several funds. There is no liquid market for airports. They are unique and change hands infrequently.

The value is decided by valuers and fund trustees who may have an interest in showing higher valuations. Are members being charged the correct price on contributions into the funds? Are exiting retirees being paid out the correct value?

The AFR article showed that Australian Retirement Trust held 31 per cent unlisted investments, Australian Super 28 per cent, UniSuper 17 per cent, REST 27 per cent, Aware Super 28 per cent and HESTA 23 per cent. That’s a lot of opportunity for fund valuations to be inaccurate.  

In July 2023 APRA challenged the funds about the accuracy and frequency of their investment valuations. In December 2024 APRA expressed concern that many funds were still not managing the conflicts of interest around the valuations of their unlisted investments properly.

These funds would also be vulnerable if they suffered a serious run of withdrawals as their unlisted assets are illiquid and could not be sold quickly.

In November 2023 the AFR reported on fund complaints after highly publicised long delays in death benefit payouts. In the 2023 financial year Australian Super had 6.1 complaints per 10,000 members and CBUS 4.4, compared to Colonial First State and UniSuper which each had 1.1.

CBUS leapt to the top of the table in the first half of fiscal 2024 with 3.5 complaints per 10,000 members, or 7.0 annualised. APRA is also investigating large payments by industry super funds to unions.

In a report last month APRA questioned the governance of some funds saying some trustees may lack the necessary skills and experience. For instance, some are appointed by unions and may not have had experience in corporate finance.

On 12^th February the AFR wrote that there is a question as to whether CBUS has the skills around its board table to oversee the large and complex fund.