Superannuation funds' annual accounts should give details of short-selling
THE article (BusinessDay, 24/9) on short-selling of shares was good in as far as it went, but it did not explain how if affects most Australians.
It just said short-sellers such as hedge funds get the shares to sell on loan from superannuation funds and other institutions.
Yet I have not seen one superannuation fund give details on this activity in their annual accounts.
Surely members, which includes most Australians, should be told what income the fund derives from this activity and what are the
risks.
Specifically we should be told :
? How are shares loaned out shown in the annual accounts? Are they included in assets as shares, a fixed-interest loan, or a derivative?
? How do loaned shares show in asset allocations? This affects members as they choose what type of fund to hold their super.
? What shares are loaned out at balance date?
? What is the income from this activity? Is it just a cash payment for the loan or does the fund share in price movements during the loan period?
? What security is provided for the loan?
? What happens if the hedge fund cannot repay the loan?
You have several journalists writing on superannuation and finance.
Perhaps one of them could explain this important matter to us.
It is our money and we should know what are the risks and returns.
Graham Davies, North Balwyn
Check with family first
SHORT-SELLING has been truly exposed as a social hazard that threatens the world's financial stability.
The consequences for poorer nations are disastrous.
If Mr Aldworth and his like-minded investment gurus wish to bet their own savings and homes on gambles such as these they are welcome to do so - with, of course, the provision that they check
first with their partners and children.
However, to use the life savings of hapless workers, who at any moment cannot be sure who is enjoying merry sport with their superannuation etcetera, is quite outrageous.
Roger Green, Ferntree GullyPity poor Buffett
I HAVE been so inspired by the Wall Street bail-outs that I have decided to follow the example of the US Treasury.
I recently read that Warren Buffett is now only the world's second-richest man, not the richest.
I think we should hold a series of benefit concerts and a telethon around the world, with all proceeds going to Mr Buffett, to restore him to the No.1 position.
Let's make this happen before it's too late.
Gary Rabin, New York
Long, dark night
SO US politicians have blinked. Enter, all ye citizens, the long, dark, economic night.
Kevin Rugg, Beaumaris
Joyous discovery?
FINANCIAL Services editor Eric Johnston wrote (BusinessDay, 22/9) that the short-selling ban "could effectively shut down options and derivatives trading".
Would this be serendipity, an unexpected joyous discovery? Or, perhaps synergy, where a combination produces a greater benefit than the sum of each?
Certainly, for those ordinary mugs who have no say in where their compulsory superannuation goes in the ASX casino, that possibility must be one great big pleasure.
Don Hampshire, Sunbury
Frequently Asked Questions about this Article…
What is short-selling and how does it involve superannuation funds?
The article explains short-selling as a practice where short-sellers (often hedge funds) borrow shares and sell them. It notes that these borrowed shares are sometimes obtained on loan from institutions such as superannuation funds, meaning a fund can be the lender of shares that others sell short.
Do superannuation annual accounts typically disclose their share‑lending (short‑selling) activity?
According to the letter in the article, the writer has not seen a superannuation fund give clear details about share‑lending in their annual accounts. The piece argues members should be told what income and risks come from lending shares, implying disclosure is often lacking or unclear.
What specific share‑lending details should my super fund include in its annual report?
The article lists specific questions members should be told: how loaned shares are shown in the accounts (as shares, a fixed‑interest loan or a derivative); how loaned shares appear in asset allocations; which shares were loaned at balance date; the income from lending (cash fee only or sharing price movements); what security or collateral is provided; and what happens if the borrower cannot repay.
How can share lending affect a fund's asset allocation and my choice of superannuation option?
The article points out that how loaned shares are classified in accounts affects reported asset allocations. That matters because members choose funds or investment options based on asset allocation, so unclear treatment of loaned shares can make it harder to compare risk and composition between funds.
What income do super funds receive from lending shares and how is it paid?
The article raises the question rather than giving a definitive answer: income might be a cash payment (a loan fee), or the fund might share in price movements during the loan period. The writer argues super funds should disclose exactly what form the income takes so members can assess returns.
What security or collateral protects super funds when they lend shares—and what if the borrower defaults?
The article asks what security is provided for share loans and what happens if a hedge fund cannot repay. It stresses that members should be told the collateral arrangements and default procedures, because those details determine how much risk the fund (and thus its members) is exposed to.
Could a short‑selling ban affect options and derivatives trading?
Yes — the article cites a Financial Services editor who warned that a short‑selling ban 'could effectively shut down options and derivatives trading.' That concern is raised as a potential market impact if regulators move to ban short selling.
Are there broader risks or ethical concerns about using workers' superannuation in short‑selling?
The letters in the article express strong views that short‑selling can be a social hazard, threaten financial stability, and be objectionable when it uses ordinary workers' compulsory superannuation. The piece reflects calls for greater transparency and scrutiny so members know the risks to their life savings.
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