8 May 2012
How super helps drive Australia’s economy
Building confidence in both the super system and industry is a core ASFA strategy. We have many initiatives earmarked to deliver this strategy. One initiative is to highlight the role of the super pool in the economy and demonstrate this for fund members with real life examples on how their money works for all Australians. There are many positive stories to tell and the following article by Gordon Noble gives visibility to many of those investments as a result of recent assistance we received from members so we could contribute to the State of the Nation program on Sky News. I know there are many more stories and I look forward to sharing them with you.
By Pauline Vamos, CEO, Association of Superannuation Funds of Australia (ASFA)
Superannuation investing in the economy
By Gordon Noble, Director Advocacy & Policy Strategy, ASFA
With the imminent release of the Federal Budget for 2012-13, it is timely to review the increasingly important role superannuation plays in driving the Australian economy and illustrate this with some specific examples.
On Sky News State of the Nation last night, the CEO of ASFA appeared with a panel of economists and commentators to preview what would be in the Budget and what should be in the Budget. This was an important conversation, canvassing a range of issues from the ageing population to the carbon tax.
The key point was that superannuation was recognised as being part of this conversation. This is an important and necessary development given the central role superannuation now plays in the economy.
As at December 2011, $1.3 trillion was invested in superannuation across all sectors.
Australia’s superannuation system enables fund members to invest across a portfolio of assets with the aim of delivering long-term investment returns to fund future retirement needs.
Whether superannuation is invested in APRA-regulated funds or self-managed super funds, the fact the investments are diversified and actively managed provides an efficient mechanism for allocation of capital to the most productive activities in the Australian economy.
Australian superannuation funds are constantly looking for new investments. In the last two years alone a further $20 billion has been invested in the ASX across the superannuation sector while $19 billion has been invested in Australian bonds.
Good capital allocation by superannuation leads to good outcomes for the Australian economy.
|Superannuation investments by asset class
|Source: Rainmaker, December 2011
Let me share with you some recent ways in which super has helped grow the Australian economy.
Growing Australian companies
Australian super funds have $435 billion invested in the ASX. Superannuation funds also invest in venture capital and private equity to provide growing Australian companies with the capital needed to pursue their expansion strategies.
- MTAA Super has established an initiative with ANU Connect Ventures to invest in commercialisation of research. The fund also invests in the SALSA Fund which provides funding of start-up biotech and life sciences companies out of South Australia. By supporting various Australian venture capital funds, MTAA Super is able to invest in start-ups/ideas that encourage innovation and production efficiency.
- AUSCOAL Super invests in early-stage capital to emerging business via its micro-cap equity manager. The fund provides start-up capital for new businesses via its Australian private equity investments in equipment hire, media and wine production/sales.
- LGS is an active investor in Australian private equity, investing in companies such as Accolade Wines, Australia’s largest wine company, and Bylaser, a specialist laser cutting manufacturing business.
- Australian Ethical Super invests in a range of innovative renewable energy, clean technology and bio-tech research companies. Biotech investments include Pharmaxis, QRXPharma, Tissue Therapies, Alchemia, Avita Medical, Circadian and Genera Biosystems. Australian Ethical also invests in companies such as Carnegie Wave, which invests in wave energy technology, and Petratherm which invests in geothermal technology.
- New innovations in equity investment include AON Master Trust which has introduced a sharia-compliant Australian equities product for Muslims.
Financing corporate Australia
Australian super funds have $113 billion invested in Australian bonds.
Australian super fund investments in bonds finance the funding needs of Australian businesses.
In the last 12 months AMP Capital has provided more than $1 billion to Australian businesses in form of debt finance (bonds), notably as a cornerstone investor across three areas:
- Australian companies raising debt funding in the domestic corporate bond market, eg Wesfarmers;
- Australian companies accessing hybrid finance in the listed ‘retail’ bond market; and
- Australian banks in the form of covered bonds. These investments give investors access to secure debt investments issued by solid Australian businesses and further develop Australia’s domestic bond markets.
QSuper has increased its investments in Australian fixed interest by $2.1 billion over the last 12 months while AUSCOAL Super has recently invested in Australian inflation linked bonds, assisting Australian corporates who issue into this growing market. LGS invests around $1 billion of its $6.5 billion in assets in credit strategies with Australian banks.
New innovative investments in bonds include Christian Super’s investments in community finance. Christian Super has invested in Forester’s Community Finance Fund, a pooled loan fund that provides mortgage financing for social enterprises. The fund, managed by Social Investment Australia, provides finance to not-for-profit community organisations, assisting them to develop financial resilience, extend delivery of their products and services and improve performance.
Investing in Australian infrastructure needs
Australian super funds have $110 billion invested in alternative assets, much of which is invested in productive infrastructure investments across the Australian economy.
AMP Capital is a top 10 global infrastructure manager with over $6.8 billion in infrastructure investments. Investments include airports, roads, electricity, gas and water utilities, hospitals and schools.
AMP Capital has invested in:
- A portfolio of six primary and secondary schools in South Australia, providing learning centres including special education schools and childcare facilities for over 4,000 students.
- A portfolio of 11 school facilities in NSW including seven primary schools, three secondary schools and one school for specific purposes, providing education facilities used by over 4,000 primary and secondary students and 350 staff.
- The Southbank Institute in Brisbane providing vocational education and training facilities to over 30,000 students.
A number of funds including AMIST and CareSuper have invested in IFM Australian Infrastructure Fund which invests in renewable, social infrastructure, seaports, airports, toll roads and electricity generation.
Recent investments by IFM include the Port of Brisbane; a port for cargo, motor vehicles and key commodities such as oil (crude and refined) and fertilisers, as well as a major export base for commodities such as coal, grain, meat and cotton for Brisbane, South East Queensland and northern New South Wales.
CareSuper has recently invested in Ventura Bus lines, the dominate provider of metropolitan public bus transport in Melbourne, now servicing approximately 56 per cent of the Melbourne metropolitan area. Ventura provides an essential public service effectively under availability contracts to the State Government. The fund has also invested in the New Royal Adelaide Hospital (NRAH) which will provide world-class health care and facilities for South Australians. The new hospital will replace the existing Royal Adelaide Hospital which opened in 1840 and will have 800 beds (700 multi-day beds and 100 same-day beds) and 100 per cent of overnight patient rooms will be single bedrooms.
New investments in infrastructure by QSuper include the Port of Brisbane and Noosa Shopping Centre. MTAA Super has invested in Mildura Base Hospital, adding value to health care in Victoria through a PPP structure, saving the State Government and supporting the provision of necessary social infrastructure to the local community. AUSCOAL Super has invested in aircraft leasing for Qantas, Jetstar and Virgin.
An example of recent innovation in infrastructure investment is the Victorian Comprehensive Cancer Centre (VCCC) which a number of super funds have invested in including CareSuper and UniSuper, which has invested $93 million. The VCCC Project will deliver a new $1 billion facility purpose-built for cancer research, treatment and care in the Melbourne suburb of Parkville.
In addition to the new facilities being built, eight world-leading cancer organisations have come together to share knowledge and resources and drive the next generation of cancer research, education, treatment and care. The VCCC Project will assist building partners to accelerate the discovery of new cancer treatments, attract the nation’s leading cancer researchers and provide a centre of excellence for people affected by cancer.
Australian super funds have $150 billion invested in property. Australian superannuation funds continue to invest new funds in investments that build Australia.
VicSuper has invested more than $120 million in its Future Farming Landscapes project which includes the purchase of approximately 8,000 hectares of farming land in northern Victoria (near Kerang) and associated water rights. The sustainable farming project invests in modern irrigation methods such as subsurface drip irrigation to reduce evaporation. Through tree plantings, ecosystem regeneration and modern crop management techniques, VicSuper aims to lower water usage taken from the Murray, improve productivity on the land and provide jobs in the local community including training opportunities for the local indigenous community.
Another investor in agriculture is AUSCOAL Super. The fund invests in cropping, beef and dairy in eastern Australian states but also has residential housing investments in estates in greater western Sydney and retirement village investments.
Cbus — the superannuation fund for construction, building and allied industries — creates employment for thousands of building and construction workers through its wholly owned property developer, Cbus Property. Over 23,000 jobs are expected to be created over the life of current Cbus Property developments, through to 2016. With an eye to sustainable development, Cbus Property completed the iconic 6 Star Green Star commercial office building at 1 Bligh Street, Sydney in June 2011. Three more state of the art 6 Star Green Star office towers are underway in Melbourne, at 700 and 720 Bourke Street and 171 Collins Street. The total completion value for Cbus Property projects developed over the past year and those currently undergoing development is estimated at $2.5 billion.
MTAA Super recently invested in the Alkimos housing development (Western Australia) and Flagstone Estates (SE Qld) that provide patient equity funding for development of affordable housing (and related infrastructure and services, which would otherwise be funded by Government) to help alleviate housing shortage and affordability issues.