Australian Super Fund Trustees Warned Over Hedge Fund Investment

by Carla Johnson, Investors Offshore.com

07 July 2003

The Australian Prudential Regulation Authority (APRA) has cautioned superannuation fund trustees about their investment of pension holders' money in hedge funds, urging them to justify their investment objectives.

In a survey conducted by the financial services watchdog late last month, it emerged that some 15% of the super fund trustees had invested an aggregate total of $1.25 billion in hedge funds, although on average, these investments accounted for just 4% of their portfolios.

However, APRA expressed some concern about the degree of uncertainty over the nature of their hedge fund exposure demonstrated by some trustees, who were unable to clearly specify the investment strategy being employed by the hedge funds in which they had invested.

As a consequence of this, Wayne Byres, General Manager of the regulatory body's specialised institutions division announced:

'We will be confirming with those trustees that they have conducted adequate due diligence and that they have access to adequate information on investment performance.' He added that:

'We will also be asking them to justify the use of hedge funds within their investment objectives.'

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