APRA attack stings fund managers

HEDGE fund and superannuation fund managers have reacted strongly to suggestions they un-necessarily place super savings at risk in a bid to provide positive returns to their members.

Many of those attending a hedge fund conference held in Sydney last week expressed surprise and disappointment at the claims, contained in a press statement issued by the Australian Prudential Regulatory Authority.

Opening the conference, Alternative Investment Management Association (AIMA) chairman Damien Hatfield said while he welcomed APRA’s focus on hedge funds, he was disappointed at the lack of consultation by APRA prior to the authority’s public statement.

“We have attempted on a number of occasions to develop a dialogue with APRA to sit down and discuss the issues relating to hedge funds,” he said.

“This came totally out of the blue, they hadn’t expressed any concern to us. I think they are misguided about what hedge funds are.”

Mr Hatfield, also the head of hedge funds at Colonial First State, said the domestic hedge fund industry had been performing relatively well. He said many of the compliance and due diligence issues raised by APRA were already being addressed by most super funds.

He believes the level of funds in hedge funds by superannuation funds would continue to grow. “This won’t dampen it at all,” Mr Hatfield said.

APRA has warned that it would be looking to see whether super fund trustees had preformed adequate and appropriate due diligence.

In the press statement, APRA general manager Wayne Byres said the authority would step in on behalf of investors if it was not satisfied.

“It is open to question as to the extent to which they are an appropriate investment for retirement savings of all members of the general public. It is questionable whether superannuation monies should be on the cutting edge of financial innovation,” he said.

Meanwhile, superannuation funds are being attacked from another government quarter. Last week the Senate rejected moves to introduce a superannuation co-contribution scheme for low-income earners and to wind back the superannuation surcharge. The industry bodies, the Investment and Financial Services Association and the Association of Superannuation Funds of Australia Ltd, have been working in unison to promote the cause for superannuation fund trustees.

IFSA CEO Richard Gilbert said most Australians saw co-contribution, where the government and individuals both put money into the fund, as a good thing

ASFA CEO Philippa Smith said superannuation was rapidly becoming a top-of-the-agenda item for consumers.

“They have an intense interest in the growth of their balances, in the current volatile economy and low returns environment,” Ms Smith said.

“Support for people trying to do the right thing and save for their retirement is urgently needed.”

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