ASIC Calls for Better Risk Fund Practices

Most recently, a review on the sufficient risk management systems was done to assess the fund managers’ capability to ensure the safety of Australia’s retirement savings amounting to $1.3 trillion.

The review by the Australian Securities and Investments Commission (ASIC) showed that if there is a possibility that when one or two fund managers are lost, the funds or investment returns may be affected.

ASIC warns fund managers to study the risks as the market is clearly still highly volatile.

According to ASIC commissioner Greg Tanzer, those managers outside the banks and insurance industries are ill-prepared for such things. ASIC’s review covered Australia’s fund managers from small to big enterprises.

Tanzer also cited that some investment managers rely heavily on third party risk management consultants. He stressed that investment managers should also have the skills needed to check the quality of their services.

It is important as well that fund managers have some liquidity to cover sudden market problems. They also need to ensure that they can act quickly if there are sudden client withdrawals.

Independent monitoring—not relying on consultants—should be available to fund managers anytime. This also helps in keeping their clients confident on their capability.

ASIC is currently developing its guidelines on best practices on risk management to help fund managers.