APRA undertook a targeted review into how super funds value Canva in light of the company’s public profile and “the deterioration in investment market conditions over the course of 2022”.
While the majority of super funds’ valuation practices passed muster, “several areas required improvement”, APRA found.
As well as inadequate revaluation triggers – APRA wants funds to revalue unlisted assets quarterly or more frequently should market conditions require, but most funds only do so every 6-12 months – the watchdog highlighted “deficiencies in information provided to the board” about Canva’s value.
There was also a “lack of consideration of the expected performance and unit pricing impact of valuation decisions”, APRA wrote in a letter to super fund licensees regarding the review.
It warned that super funds “must understand their responsibilities and display effective ownership of their investment governance framework”, flagging future reviews on the issue.
But funds had improved some of their valuation practices since APRA first tightened their guidelines on the issue in 2021, it said.
“We observed examples of better practice by [funds], particularly relating to querying the valuation approaches of appointed investment managers and reflecting valuation adjustments according to the specific circumstances and policies,” it said.
APRA’s targeted review followed the Financial Regulator Assessment Authority, run by former Macquarie chief executive Nicholas Moore, declaring the prudential regulator had fallen short in its oversight of how funds value assets such as office buildings, infrastructure and private equity funds in July.
The failure could leave super fund members out of pocket thanks to “unfairly reduced or inflated balances”, the review warned, amid a cooling global economy and increasingly complex investment strategies.
It specifically pointed to inflated valuations of Canva as an example of potentially inflated valuations, suggesting APRA only started scrutinising the issue because of media coverage around the company’s slumping value.
