Tuesday, February 23, 2010

Submission to the Cooper Review of Superannuation

I have written a submission to the Cooper Review of Superannuation (that is privatized social security) in Australia. 

You can find it here

The submission is entirely about asset security issues – that is can you be assured that the assets are really there?  This is (obviously) of concern to people charged with looking after the (entire) retirement savings of tens of thousands of Australians.  However I have also found it is a very useful conversation to have with anyone recently finding themselves in possession or care of many millions in financial assets.  [If you run a small family office managing financial assets after you have (for instance) sold the family business then you should probably read it.]

The issues covered are broker and custodian failure (think Lehman failing and not returning assets to the clients) and also simple theft or misplacing of assets. 

Under normal circumstances this would normally be (very) dry reading.  However the events of the last two years have driven home the relevance. 


Zardoz said...

Is it really right to place so much emphasis on super as "privatized" social security? I take your point, but only up to a point... After all we still get a government pension if we end up in the poorhouse at the end of our working lives.

The guv'mint hasn't totally exited stage right, and compared with some other countries we still seem to be in a better position. Or perhaps I don't understand the 401(K) thing as well as I think I do.

Perhaps you might consider a blog post on comparative super schemes around the "free world". That would be instructive.

John Hempton said...

Ah - it is. The country remains solvent only because we plan on kicking most people off the full pension because they will be funded.

I am also placing it in context for American readers.

It is - by American standards - a privatised scheme. Most of us pay into private accumulation schemes with a social security safety net. They will slowly reduce the value of that net...


Neil said...

I found your submission fascinating. I've gone into details of the current act and regulations while considering setting up a small investment fund (technically an MIS) and I could never figure out what the act was really trying to achieve or why it was so different from the US system.

I wonder how we got here...

Jeff Matthews said...

Occasionally the US gets something right. We still had Madoff, and funds bypassed US laws to go offshore, resulting in Lehman taking down the system, but John is dead right that without withdrawals, no Ponzi scheme gets discovered.

He is also right that scammers will exploit the loopholes.

And he is scary-right that 20 years from now you could face black holes that make Madoff look like a piker.

So...what are your regulators waiting for?


vlade said...

Your timing was uncanny:

John Hempton said...

There will be MANY more...


Anonymous said...


It would be good to have a post on what people should do before investing in a managed fund or super account.

I'm talking about people without a finance background.

If I see a product that has had good performance how can I be sure that there is no fraudulent behaviour?

Anonymous said...

in terms of vanishing assets you should have a look at NBS listed on the ASX.

it would take 5 minutes to review the last couple of years of announcements to find a fascinating trail of such.

Katie Gardner said...

Saving for our old age is very important, which makes not touching your super fund a great idea.

John Smith said...

Integrity in asset management is rarely found when it should be the norm. Sad really!

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.