Tria Investment Partners managing partner Andrew Baker said while the larger funds are accustomed to preparing detailed three- to five-year strategic plans for their boards, for smaller funds this requirement could represent a “significant step up in expectations”.
Mr Baker said addressing the risk management requirements set out in SPS220, part of APRA’s program for raising prudential standards, requires “considerably more than a tick-a-box risk or compliance capability”.
“It implies a sophisticated approach to strategy and interaction across the management team so that strategy informs risk management and vice versa,” said Mr Baker.
“This may be challenging for smaller funds with fewer management resources and less developed capabilities.”
SPS220 states a responsible superannuation entity (RSE) licensee “must have a written plan that sets out the strategic direction of the RSE licensee’s approach to managing its business operations”.
Mr Baker said the business plan must also be aligned with the fund’s risk management framework and must be reviewed annually by the management team and the results reported to the board.
He said the APRA scale tests also mean super funds must “make an annual determination whether MySuper members are disadvantaged due to insufficient scale, and presumably merge if so”.
Mr Baker said while SPS220 represents another “growing pain of becoming a true financial institution” for larger funds, for small funds it’s “yet another increment to the effort and cost of running a super fund, adding to the pressure to lift trustee performance or consolidate”.
