The Australian Securities and Investments Commission (ASIC) is conducting a review of the regulatory framework for private assets in response to the growing influence of Australia’s $4 trillion superannuation industry in private markets. ASIC Chair Joe Longo highlighted the importance of regulating private markets, emphasizing that it impacts not only institutional investors but also everyday Australians, particularly superannuation fund members.
In a recently released discussion paper, ASIC outlined key risks associated with private markets, including opacity, conflicts, valuation uncertainty, illiquidity, and leverage. The paper revealed that the global value of private capital funds had tripled over the past decade to reach US$14.6 trillion, with APRA-regulated superannuation funds playing a significant role in this growth.
Super funds are allocating a substantial portion of their assets to private markets, with some of the largest funds dedicating up to 38% of their investments to private assets. This shift towards private markets is reshaping the dynamics between public and private markets, driven by the sheer volume of superannuation money flowing into these private assets.
ASIC is closely monitoring this trend, acknowledging that the increasing presence of superannuation funds in private markets has profound implications for Australia’s economic growth. Simone Constant, an ASIC Commissioner, highlighted the unique role of Australia’s superannuation sector in influencing market dynamics, given the industry’s exponential growth and its impact on the broader economy.
Constant emphasized the need for ASIC to ensure that super funds continue to support Australia’s growth while safeguarding members’ interests in the less transparent private market investments. The regulator aims to work collaboratively with peer regulators to instill confidence in the valuation and management of private market assets held by super funds.
While public markets provide essential public goods such as price discovery and liquidity, private markets pose challenges related to transparency and valuation methodologies. ASIC’s discussion paper pointed out that the lack of transparency in private assets could lead to mistrust about valuations, potentially undermining investor decision-making and market integrity.
ASIC’s proactive review of private markets reflects the regulator’s commitment to addressing the evolving landscape shaped by superannuation funds’ growing presence in private assets. The outcome of this review is expected to provide valuable insights that will inform ASIC’s regulatory priorities and work program in the coming years.
As Australia’s superannuation industry continues to expand its footprint in private markets, regulators like ASIC play a crucial role in ensuring that the interests of fund members are protected and that market dynamics remain robust and transparent.
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