Australian regs could limit PE investments

Portfolio disclosure remains a ‘very live issue’ with the private equity industry, says the CEO of ASFA. 

New disclosure regulations recently proposed in Australia could limit private equity commitments from the country’s capital-rich superannuation system, said Pauline Vamos, chief executive officer of the Association of Superannuation Funds of Australia.

“The community expects transparency from superfunds and we support it,” said Vamos. “Our only concern is that we’re not sure how much of the information will be made public and how much is for prudential purposes.”

“If the final result is to fully disclose the whole portfolio, then that could hamper investments in some private equity and venture capital funds. But we’re not there yet.”

Under proposed reforms, the supers will be required to publicly disclose information such as fees and costs payable by the fund and asset allocation percentages.

In addition, every six months the supers will need to identify all of their direct or indirectly held assets and each asset’s current value on their website, according to a King & Wood Mallesons report. 

The disclosure requirements are for all Australian super investments globally, including existing commitments. 

Vamos said portfolio disclosure remains a “very live issue” with the private equity industry. 

“A lot of investments are confidential and if the information was released publicly it could compromise the investment,” she said. “The industry has raised a lot of issues around how you disclose it.”

The supers have less than 10 percent of total capital invested in private equity, which she roughly estimates to be near A$40 billion (€27.7 billion; $37 billion).

The consultations with regulators are ongoing and a final decision is expected to be reached in 12 months, an extension from the previous deadline of June 30. 

If the rules do require the disclosure of individual portfolio companies, that will be groundbreaking, adds Peter Feist, partner at Weil & Gotshal & Manges. 

“No regime I’m aware of has a requirement for publicly disclosing the underlying assets of a private equity fund,” Feist said.

Vamos believes the issues will be resolved to the satisfaction of all parties. 

“The fact that the regulations have been deferred shows both regulators and government understand they can backfire and have unintended consequences, and they want to avoid that.”