Portfolio holdings disclosure regulations come into effect

Superannuation funds will have to disclose their portfolio holdings across a range of assets and derivatives as regulations for portfolio holdings disclosure (PHD) come into force this year.

Super funds will be required to publish their first PHD reports by 31 March, and then update their disclosures every six months thereafter.

Funds will have to provide disaggregated data on listed and unlisted equities, property and infrastructure, as well as fixed income, cash and derivatives. In listed assets, each item must be disclosed along with the value and weighting of each item, according to the new regulations.

Australia has lagged behind other markets when it comes to portfolio holdings disclosures.

"Australia might have a great national superannuation policy, but entity-level disclosure of Australia's super funds is in the main poor due to the culture of super funds and investment managers not being very open regarding what they actually invest in," noted Alex Dunnin, executive director of research and compliance at Rainmaker Information. "Not all funds have this dinosaur attitude, and for them the government's portfolio holdings disclosure reforms will be no big deal. The reforms will just even the playing field."

Rainmaker Information's first assessment of the ESG qualities of super funds found several areas for improvement. Rainmaker's first ESG Superannuation Study identified 36 super funds that collectively offer 171 ESG investment options. Of those 36 funds covered in the study, only 75% of Australia's ESG super funds practice PHD. Of the 14 funds that don't practice PHD, half are NFP funds and half are retail.

"Fund members who want to know what investments their funds are putting their superannuation money into will now be able to find out," Dunnin said. "It's their money, they should be able to get this info if they want."

Other data reinforce the finding that not all funds and fund manager who identify themselves as ESG or responsible investors practice full transparency. The most recent Responsible Investment Association Australasia (RIAA) Super Study showed that only 23% of super funds disclose their full holdings to the public, another 11% disclose the largest 21 to 50 holdings, while a third of the funds (30%) disclose only the largest nine holdings or less, or do not provide regular disclosure at all.

In addition to the information on assets, super funds will have to disclose information on their derivative holdings, including separating out derivatives by value and by category - swaps, forwards, futures, and options, as well as by currency.

The increased accountability on all super funds, as well as ESG super funds, has a blunt impact, Dunnin said.

"Don't talk the talk if you're not walking the walk," he said.

Read more: AustraliaRainmaker InformationAlex DunninESG Superannuation StudyResponsible Investment Association Australasia