Australia has ranked fourth in the world for its transparency of pension fund disclosures, according to a world first global benchmark.
The Global Pension Transparency Benchmark, a collaboration between Investment Magazine’s sister publication Top1000Funds and Toronto-based CEM Benchmarking, brings a focus to transparency of pension fund disclosures.
The GPTB ranks 15 countries on public disclosures of key value generation elements for the five largest pension fund organisations within each country. The overall country benchmark scores look at four factors: governance and organisation; performance; costs; and responsible investing; which are measured by assessing hundreds of underlying components.
The benchmark focuses on the transparency and quality of public disclosures with quality relating to the completeness, clarity, information value and comparability of disclosures.
Australia scored well across all four factors with a global ranking of two for governance, three for cost, four for performance and eight for responsible investment. Overall it ranked fourth behind Canada, The Netherlands and Sweden.
The five funds assessed were: AustralianSuper, Aware Super, Future Fund, QSuper and Unisuper.
The Australian funds did well on the governance factor, with an average score of 72, ranking second only to Canada. Funds scored well in all areas assessed except organisational strategy, and did particularly well in disclosures on compensation and human resources receiving top scores.
The Australian funds were also recognised for their cost disclosures especially the disclosure of transaction costs. The results showed however that Australian fund benchmark disclosures were relatively weak at the asset class level.
Australian funds were also ranked second in the world in disclosures for member service levels.
Across the globe the transparency of disclosure varied greatly, both between countries and between funds across all the factors that were measured. In some instances there are wild variances between the best and worst performers.
Pension funds around the world scored best on performance disclosure, followed by governance, cost and responsible investment.
Principal at CEM Benchmarking, Mike Heale, says the benchmark has highlighted the areas where improvement is needed.
“We found quite a remarkable range for both what was disclosed and the communication quality. Individual fund total transparency scores ranged from 18 to 82. The highest scoring funds generally covered all factors well and provided many best practice examples that we have highlighted,” he says.
“However, we were disappointed with the overall global results. All too often disclosures for responsible investing, costs, and governance were non-existent or minimal. Transparency builds trust. It is the right thing to do and the smart thing to do. There is much room for improvement.”
Analysis of the results showed that certain countries, and pension funds, demonstrated best practice with regard to each of the four factors.
Within costs, the Netherlands was a clear leader. Within governance, the Canadians shone. When it came to performance transparency, the United States was the leader. And within sustainability, Sweden was the outlier, although all the Nordic countries performed well.
The wildest variance was in the disclosure of governance (0-97) and responsible investment (0-88).