(Bloomberg) -- Australia’s pensions regulator said some funds in the A$3.9 trillion ($2.6 trillion) industry aren’t valuing assets such as private equity and property frequently enough.

The Australian Prudential Regulation Authority said unlisted assets in some instances weren’t valued “at least quarterly,” in line with the recommendations, according to a letter published Wednesday. There was also room for improvement on the extent to which boards scrutinize the valuations of these assets, the letter said. 

Australia, home to one of the world’s fastest growing pools of pension capital, has seen an increased appetite for private assets both domestically and abroad, and they now comprise almost a fifth of their investments. Last year, some of the biggest firms told Bloomberg they’d seen write downs in their property portfolios, but said that hadn’t materially impacted members’ returns. 

APRA Deputy Chair Margaret Cole said governance around unlisted asset valuations remained a supervision priority for the nation’s regulator and the organization will continue to directly engage with funds “where weaknesses have been identified.” The greatest areas for improvement are in small to medium size funds, she said, as well as so-called platform funds which offer members a menu of investment options.  

Pension funds’ unlisted investments range from property and infrastructure, to private credit and private equity. 

“Inappropriate asset valuations, especially during periods of heightened market volatility, may materially impact prices applied to member transactions, member equity and reported investment returns,” Cole said in the letter. 

The APRA letter was based on a survey which took place in late 2023 and showed eight funds had reported instances where their board has challenged, rejected or over-ridden valuations given to them by management. For external manager valuations, that rose to 18 funds.

The survey found increased market volatility or stress was the most common reason a fund would revalue an asset and property and private equity valuations were most heavily scrutinized by boards.

The survey is separate to APRA’s review of asset valuations and liquidity management practices, which is expected to be released later this year. 

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