Consequences of the Australian Prudential Regulatory Authority’s Investment Performance Tests

Abstract

The Australian Prudential Regulatory Authority (APRA) has introduced for MySuper products a publicly available comparison of investment performance over three-year rolling periods and will be introducing a similar longer-term comparison under the Your Future Your Super Performance Test. The investment performance will be compared to a reference portfolio. This paper considers the effect of holding illiquid assets and “active” investment management as part of a superannuation fund portfolio and concludes the APRA tests may have undesirable consequences for superannuation fund members.

Keywords: APRA regulation, Investment strategy, Illiquid assets. Member outcomes

JEL Classification: D14, D18, G2,