Not-for-profit funds push for more transparency on deals, salaries

Industry Funds Management (representing not-for-profit funds) is calling for sweeping transparency reforms, including mandatory disclosure of all transactions between funds and related parties and public reporting of how much fund managers are paid to manage members' retirement savings.

A related-party transaction happens when a super fund outsources services to an entity with which it has financial links (for example, a bank-owned fund buying services from the bank). These deals matter because they can lead to higher costs for members if not clearly disclosed and scrutinised.

Not-for-profit funds argue that publishing fund managers' pay would improve accountability. The article notes top fund managers can earn from about $500,000 to several million dollars a year, and that pay levels are often kept secret—so disclosure would show members how much is paid to invest their retirement savings.

The proposals from union-linked funds go further than APRA's recently released investment and governance standards. Industry Funds Management is pushing for legislated, uniform disclosure standards across all parts of the super industry, beyond the regulator's more principles-based approach.

APRA released final rules on investment and governance and said it will supervise the industry from next July. Deputy chairman Ross Jones said APRA will take a principles-based approach and work with trustees and boards to monitor how they meet prudential requirements and manage funds in beneficiaries' best interests.

Mandatory disclosure would make related-party deals transparent, helping members spot potential conflicts of interest or inflated costs. That transparency can pressure funds and service providers to negotiate fairer terms and help trustees act in members' best interests.

The article cites a 2010 APRA paper which found that for-profit retail funds tended to pay more when entering into related-party transactions than other types of funds—highlighting why disclosure of these deals is important for protecting members.

Industry Funds Management, whose new chairman is former Victorian premier Steve Bracks, is backing the call. They want uniform disclosure standards legislated across the whole super industry, covering investment managers and other material service providers to increase accountability as the industry grows.