Regulator shines light on ethical super funds
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The corporate regulator is probing the practice of “greenwashing” by superannuation and managed funds that can mislead investors as to their commitment to environmental, social and corporate governance (ESG) practices.
The Australian Securities and Investments Commission (ASIC) is investigating whether the ethical investments offered by the funds are as “green,” or ESG focused, as claimed.
Credit:Karl Hilzinger
ASIC commissioner Cathie Armour says there is growing unease about the risks of “greenwashing” of financial products, partly driven by a lack of clarity about labelling of investment portfolios.
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“There’s definitely another barrier in there… there’s a barrier for them to put people in and it’s trying to work out what that barrier is because it seems to be a little complex.”
Ashton’s findings come as research from Investment Trends and State Street Global Advisors (SSGA) found that 70% of planners in Australia were using or had planned to use managed accounts, but the issue was around figuring out what was stopping advisers committing their clients to the model.
“It could be a heap of things, maybe the statement of advice (SoA) is too hard to sell to the client, it might be the cost is a little higher and they can’t get their head around how that works in best interests,” Ashton said.
1 July 2021
Advisers are not following through on maximising client funds in managed accounts, despite popularity with its initial uptake.
Angela Ashton, Evergreen Consultants founder and director, said there seemed to be a barrier stopping advisers.
“Across all platforms, they’re building managed accounts and they’re setting them up and then advisers are not using them anywhere near as much as they promised or thought they might,” Ashton said.
“There’s definitely another barrier in there… there’s a barrier for them to put people in and it’s trying to work out what that barrier is because it seems to be a little complex.”
“As hybrids are sold into the market, retail investors tend to sell older hybrids (where some of the optionality creates additional uncertainty) in order to buy the newer issues. The result is that the market can oversell, creating opportunities for informed investors.”
Campbell Dawson, Elstree Hybrid management director, said: “We believe the hybrid market offers opportunities for active investors as it is inherently inefficient. It is dominated by retail investors who have a limited understanding of bank and insurer capital issues, and who under and overreact to issuer specific risks and equity market movements. We construct portfolios which seek to benefit from market opportunities and inefficiencies and pass these returns on to our investors”.