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Australian regulator urges poorly performing pension funds to find buyers, exit industry

[SYDNEY] Many Australian pension funds have been suffering from falling asset prices, liquidity pressures and declining investor inflows due to the coronavirus pandemic and some should consider finding a buyer, the industry regulator said on Wednesday.

Trustees must "be able to demonstrate their 'right to remain'," the Australian Prudential Regulation Authority (APRA) said in an article published on its website.

"For some the only way forward ... may be to exit the industry and pass on the trusteeship of their funds to others who are better equipped for the task."

Australian superannuation funds, which have A$2.70 trillion (S$2.55 trillion) invested in public shares and illiquid assets, have seen the value of those assets fall by about 10 per cent since February, according to research from Rainmaker Information.

Some funds are also struggling to comply with early withdrawal requests after the government allowed cash outs before retirement of up to A$20,000 as part of its response to the coronavirus crisis.

APRA has said 94 per cent of the funds it regulates have been able to pay early withdrawal requests within five business days, but 10 funds have paid just 50 per cent of the amounts requested in that same period.

It added that while the number of APRA-regulated funds had fallen from 279 to 185 in the past seven years, it still considers 185 a large number that meant the industry was not operating with maximum efficiency.

"APRA continues to pressure the trustees of poor performing funds to merge or exit the industry unless they are able to materially lift their game," it said.

It added it was applying the pressure through a stronger prudential framework, intensifying supervision activities and the publication of a heatmap exposing poorer performers.


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