There is no-one-size-fits-all way of complying with prudential standards, an APRA representative told delegates at the Investment Administration Conference.
Robyn McMahon, general manager, diversified institutions division at the Australian Prudential Regulation Authority, urged funds to look at the intent of the standards and to think about what they were able to do to fulfil its obligations.
“I would stress that there is no-one-size-fits-all,” she said. “There is no best practice, because there is such a range of funds, fund sizes and operating models.”
Compliance, she added, should not be a tick-box documentation exercise.
“It is about what makes sense from an organisational perspective. Things change as you grow and what becomes right in the circumstances changes,” she said.
McMahon’s message was tempered with a call for caution on the trend towards internalising fund management or investment operations capabilities. She urged smaller funds to think hard before joining larger funds in this trend – AustralianSuper, Cbus, Sunsuper and Vision Super all spoke at the conference of how they were performing more middle office functions internally.
“Funds should ask if they have the capacity do this effectively,” she said. “Realistically there are a lot of small funds where that is not going to be the case.”
She explained that third party expertise was often more beneficial for small funds than trying to go it alone.
Her third point to delegates was for fund’s middle offices to ensure a sufficient level of reporting to enable trustees to monitor their investment options and ensure they remain in true to label.
“Has the investment option met the right risk-reward levels?” she asked. “We expect there to be resourcing to support that investment option governance.”
Lastly, she talked on the importance of stress testing for the investment options to members and for funds to have appropriate resourcing.
Drew Vaughan, owner, Dymond, Foulds & Vaughan, who spoke after McMahon, warned that greater regulation was inevitable for superannuation as the sector grew in size and importance.
While John Creeley, chief financial officer, First State Super predicted that funds would soon employ individuals whose whole task was devoted to reporting to APRA.