Clear and effective disclosure of portfolio holdings and fees and costs by superannuation trustees is important for the proper functioning of the financial market, and product issuer accountability. It allows consumers, advisers, industry participants, regulators, academics and others to better understand how trustees are making decisions about their funds, the data underpinning those decisions and make comparisons. ASIC recommends that trustees consider this in meeting their legal obligations related to portfolio holdings and fees and costs disclosure. Trustees can best achieve the aims of these obligations by focusing on making the disclosures required by law easily accessible, consistent in presentation and easy to understand.
Portfolio holdings disclosure
From March 2022, most superannuation trustees are required to disclose information about the portfolio composition (underlying assets and derivatives) of each of the investment options offered by their funds. This information must be published on the publicly accessible part of the fund’s website and updated twice a year, within 90 days of the effective dates – 31 December and 30 June each year. This is known as Portfolio Holdings Disclosure (PHD).
The PHD requirements set out expectations about the way in which trustees need to publicly disclose portfolio holdings information and in turn, provide clarity for industry stakeholders and the general public about how superannuation funds are being invested.
Following the first reporting date on 31 December 2021, ASIC reviewed a sample of PHD disclosures on fund websites. While most funds sampled complied with the PHD requirements, we found considerable room for improvement in the presentation of the disclosures. We recognise that this is a new requirement and expect trustees to focus on improving their disclosures in the next reporting period, ending 28 September 2022. We will continue to follow up with trustees where we identified potential non-compliance.
Accessibility
Trustees must ensure that their disclosures are publicly available on fund websites and we expect these disclosures to be easy to access. This means the disclosures should be in a logical location (such as with other information about investments) and they should not be hidden. Access to disclosures must not require a member log-on. While at least one format of disclosure must be a delimited file format, the disclosures must be user-friendly and easily downloadable, which includes providing them in an electronic file (such as Excel for example).
Our review found that, while most trustees complied with this requirement, some approaches better supported users to access the information. For example, some trustees created separate files for each investment option, with different sheets for different types of information (such as asset classes). Putting disclosures for all the investment options into one file can make it difficult for users to find the information they are interested in.
Trustees should focus on the following areas to ensure users can access the disclosures on fund websites:
- integrate disclosures into existing investment option or asset allocation information on fund websites. For example, include PHD information for an option on the page or pages that have information about that option
- confirm that the fund website search function will locate the disclosures using logical search terms (for example portfolio holdings, investment disclosure etc)
- label the disclosures in a way that makes it intuitive for users to find.
Consistency
Trustees must ensure that disclosures are consistent with the prescribed tables in the regulations – see Schedule 8D of the Corporations Regulations 2001. They should also consider how information disclosed for the PHD requirements fits with other information disclosed on the fund website. Consistent disclosure allows users to be confident in, rather than confused by, the information provided. As outlined in the Explanatory Statement accompanying the PHD regulations, disclosures must also include details of the valuation methodology used by the trustee, including currency conversion rates, where applicable.
Under the requirements, disclosure is required for investment items held by the trustee, an associated entity or pooled superannuation trust. However, there is no requirement for trustees to disclose investment items of holdings in managed funds operated by non-associated entities.
Trustees should focus on the following areas to ensure holdings disclosures meet the legal requirements:
- include all the information in the prescribed tables, for example the addresses of internally managed unlisted property, security identifiers for listed assets, the investment option the disclosure relates to and whether the holding is internally or externally managed
- accompany the value and weighting for individual assets with the total value and weighting for that asset class in the same table
- make sure valuation methodologies are disclosed consistently across holdings, align with APRA reporting, and are expressed in Australian dollars.
Clarity
PHD should be clear and readable. Well-structured data can improve readability for users and supports analysis and understanding. This is particularly important given the large amounts of data that are disclosed to meet the PHD requirements depending on the investment options number.
In our sample review, we noticed variability in data conventions and readability. We encourage trustees to adopt ‘tidy data conventions’ to ensure that disclosures are clear and machine-readable, which supports user analysis and interpretation. A tidy data set is one in which:
- every column is a single variable
- every row is a single observation, and
- every cell is a single value.
We also noted that some trustees included cross-references to other information or documents in their disclosures. Some trustees included additional information that, while potentially helpful, may risk burying the essential information and confusing users. For example, some trustees added extra columns disclosing additional asset description information, holdings details, security identifiers and weighting categories beyond those in the prescribed tables. When providing additional information, trustees are encouraged to present it in a clear and user-friendly way that corresponds with the required information.
To ensure holdings disclosures are clearer and more readable, trustees should:
- include all information about an option in one place rather than requiring users to switch back and forth between different documents or locations to understand the holdings, value and weighting of an investment option
- omit information that is irrelevant or unhelpful, such as duplicate information and information in relevant tables if the investment option has no derivatives
- provide disclosures in formats that are clear for users and do not need to be adjusted to be readable, such as needing to expand column and row widths in a spreadsheet
- include an explanation of the nature and purpose of the disclosures, and other relevant information to assist understanding, such as FAQs. For example, explanation of why the trustee is making the disclosures, how often the information will be updated, what rounding rules have been applied and, if applicable, the definitions of any unusual or industry terms used. We recommend including this information (or a link to this information) on the same page near the related disclosures.
Fees and costs disclosure
From 30 September 2022, all trustees need to ensure their PDSs meet the new fees and costs disclosure requirements outlined in the revised Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements (RG 97) and the associated instrument ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070.
RG 97 and the fees and costs instrument were revised to more clearly present the true cost of running a super fund. They also confirm that fees and costs in a PDS are required to be disclosed gross of any tax benefit that is passed on to the member as fee deductions or credit to member accounts.
Since late 2020, ASIC has been monitoring the transition of trustees through a review of revised PDSs. We have found that many trustees are yet to adopt the new requirements. ASIC will be checking that trustees have adopted the new requirements by the end of the transition period and take appropriate action where we find issues of non-compliance.
Some trustees have also had to consider how to disclose new fees introduced to help ensure the financial resilience of trustees. From 1 January 2022, section 56 of the Superannuation Industry (Supervision) Act prohibits trustees from being indemnified for civil, criminal or administrative penalties incurred in relation to any Commonwealth law. Some trustees have introduced fees to help build or maintain capital reserves or to implement other resiliency-related arrangements.
If any trustee resilience measure results in a new fee to members, whether now, or at some time in the future, trustees will need to disclose the new fee in the PDS and periodic statement. Trustees may need to disclose the fee even if it is paid from an existing reserve. The updated fees and costs instrument and RG 97 make it clear that in certain circumstances, costs met using reserves need to be included in the calculation of fees and costs disclosed in the PDS and periodic statement. But to avoid double-counting, Trustees only need to disclose the amounts paid from a reserve that have not already been disclosed elsewhere.
While disclosure has its limits, clear, consistent and accessible fees and costs disclosure can help consumers and advisers compare superannuation products more easily and make better informed financial decisions. For industry participants, good disclosure contributes to public trust in the integrity and efficiency of the superannuation system.
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