In its submission in response to the government’s proposed reforms of the Your Future, Your Super performance test, the SMSFA limited its consultation to question 34, and the application of performance tests to “other products” – namely self-managed superannuation funds.
“We do not support the introduction of a performance test for SMSFs. To do so would create an unnecessary regulatory burden, red tape and add further cost to the system for all stakeholders, for little benefit,” the association stated in its submission.
“Individual SMSFs are not marketed to the public and are closely held, private funds. Under superannuation law, all members of SMSFs are required to be a trustee of the fund or a director where a corporate trustee is used.”
The submission continued that trust law duties and the covenants prescribed in the statute also apply to SMSFs including the duty to act in the “best financial interests of the beneficiaries”.
“Trustees are responsible for administering the fund and its investment strategy. This includes formulating, documenting and regularly reviewing a compliant investment strategy which considers the risk, composition, diversification, returns and liquidity of the fund’s investments,” the submission stated.
“Direct control and responsibility to the management of fund investments lies with the trustees. As such, each SMSF will have bespoke investment strategies, driven by the unique needs and risk profiles of its members.”
The association added that trustees can regularly review the fund’s investments, investment strategy and performance, often in real time, as well as enter the market in real time to acquire or dispose of specific investments.
“Many SMSF trustees will be supported by one or more professional advisers, such as financial advisers and stockbrokers that provide a range of services which can include the ongoing management of investment portfolios, regular reviews, through to advice and recommendations,” it stated.
“Different investments, even within the same asset class, may provide regular income, capital gains or a combination thereof.”
The submission concluded that an investment time horizon must also be considered and will vary considerably as will the risk appetite of trustees and fund members.
“The uniqueness and nature of SMSFs makes the benchmarking of individual funds challenging and of little value,” it stated.
“The trustees’ existing duties and obligations require them to consider the needs of members and the fund’s investment strategy. This coupled with the advice services they receive, and the statutory, professional and ethical duties imposed on those professionals, further safeguards the sector.”
