Review into superannuation trustees' treatment of private equity asset - Canva

To: All RSE licensees

APRA conducted a focused review of RSE licensees that were identified as holding the private equity technology company, Canva Pty Ltd (Canva), in late 2022. The purpose of the review was to:

• understand what actions these RSE licensees took with respect to Canva; 
• assess compliance with APRA’s unlisted asset valuation governance requirements and expectations; and
• form a view on key superannuation sector risks.

Background

In late 2021, APRA released a report from a broad thematic review of unlisted asset valuation practices and commenced consultation with industry regarding enhancements to Prudential Standard SPS 530 Investment Governance (SPS 530), which incorporated our findings from the review. As such, APRA expected to see improvement in certain areas of unlisted asset valuation and governance practices following the release of these publications. 

In light of the deterioration in investment market conditions over the course of 2022 and Canva’s public profile as an asset in a higher-risk asset class, APRA selected Canva as the focus of a targeted review of unlisted asset valuation governance.

Findings

APRA assessed the majority of RSE licensees’ governance practices related to their valuation of Canva as appropriate. We observed examples of better practice by RSE licensees, particularly relating to querying the valuation approaches of appointed investment managers and reflecting valuation adjustments according to the specific circumstances and policies of the RSE licensee. These were issues flagged as requiring improvement in APRA’s 2021 unlisted asset valuation thematic review. Valuation methodologies applied by RSE licensees were consistent with their respective valuation policies and RSE licensee practices and policies were broadly in line with APRA’s expectations. 

However, several areas required improvement. We observed some instances of:

• inadequate interim revaluation triggers in valuation policies; 
• deficiencies in information provided to the Board; 
• gaps in Board skillsets, willingness to challenge information provided and access to expertise; and
• lack of consideration of the expected performance and unit pricing impact of valuation decisions. 

Through our supervision activities, APRA has continued to address these issues with RSE licensees since the conclusion of the review. APRA has also used the findings to inform planned thematic reviews on unlisted assets and liquidity risks, in addition to further developing APRA’s approach to stress testing.

Actions for industry

Embodied in the recent enhancements to SPS 530 are more stringent requirements for RSE licensees to implement appropriate valuation governance as part of their investment governance framework. To meet the requirements of SPS 530, RSE licensees must understand their responsibilities and display effective ownership of their investment governance framework. APRA will continue to conduct reviews of RSE licensee practices in relation to SPS 530, with the objective of appropriate and equitable member outcomes and management of investment risk.