The APRA heatmap methodology focuses on fees, the use of growth and defensive exposure for assessing performance will impact hedge fund allocations and portfolio management strategies due to its agnostic positioning on portfolio diversification and risk management. What are the outstanding issues and considerations arising from using a standardised industry approach?
David Bell, executive director, Conexus Institute
Travis Schoenleber, managing director, Cambridge Associates
Moderator: Gerard Parlevliet, chair, investment committee, Prime Super
- There is a risk that the intentions of the heatmaps to start offering data points around comparing fees and performance has been extrapolated to infer more serious judgements are taking place which is somewhat inaccurate.
- Further work needs to take place to increase the sophistication of the exercise as currently tail risking hedging strategies are not accurately accounted for in the heatmaps.
- APRA are also looking towards clear definitions of growth and defensive in order to offer the industry better vocabulary and metrics from which to draw meaningful comparisons.