A media article earlier this month suggested superannuation funds were considering listing the units of their funds on the Australian Securities Exchange (ASX), when the ASX launches its AQUA II system later this year.
The AQUA II enhancements make it possible for managed funds to list their units, thereby bypassing the usual financial planner distribution channel.
The reasoning behind listing superannuation fund units would be to retain a link with members of self-managed super funds (SMSF), the article said.
I seriously doubt this will ever happen.
Although the article does not explain how super funds would tap into the SMSF sector through listed units, the idea, presumably, is that SMSF trustees would buy the units as part of a wider portfolio.
Ignoring the argument for the moment that most trustees switch to an SMSF because they want to own their investments directly, the proposed transaction throws up a number of problems.
Firstly, listing a unit on the stock exchange would require a whole new level of portfolio disclosure for super funds, especially as the units will be priced daily.
Considering the current debate on portfolio disclosure of industry funds, it seems unlikely they will switch quickly to the rigorous requirements of an exchange.
It also raises the question of who has the final fiduciary duty over the investments.
Does the super fund pass on the fiduciary duty to the SMSF trustee, or does it retain a level of responsibility?
Besides, most super funds are multi-managers; they use active managers to run their holdings.
An SMSF buying a unit in a super fund would effectively run a manager of multi-managers fund, with the associated layers of fees; hardly a cost-effective structure.
Finally, there are some taxation issues to work through in relation to capital gains, income streams and contributions.
The question is whether all this is worth the super fund's time and resources, as the SMSF sector would pretty much be the only target group for super funds under this system.
After all, purchasing a unit through a stock exchange by a direct investor would unlikely be seen as voluntary contribution and, therefore, would attract the normal tax rate instead of the concessional tax rate of 15 per cent on super contributions.
You would be mad to invest your super money that way; it is more efficient to just become a member of the super fund in addition to your SMSF.
Just make sure you indicate it is a conscious choice to have more than one fund or have more than $1000 in your account.
