Corporate bond debate needs to refocus

While the debate over super fund investment in equities and corporate bonds is a much-needed one, it is important the discussion is based on facts, the peak body for superannuation and retirement policy and research said today.

The Association of Superannuation Funds of Australia (ASFA) said a mature debate was needed on the role the super industry could play in developing a corporate bond market to further enhance its role in the Australian economy.

Criticising the industry over its current asset allocation was over-simplifying the issue, ASFA said.

“ASFA provided a forum to further this important debate on investing in fixed interest at our Investment Interchange event last month because we are extremely mindful of the important role the super pool of assets must and does play in the Australian economy, particularly with ageing demographics and increased market volatility,” said ASFA chief executive officer, Pauline Vamos.

“There has been criticism that the superannuation industry does not invest enough in the corporate bond market but, the fact is, many Australian corporates find it difficult to issue bonds in the Australian marketplace.

“Super funds have fundamental faith in Australian corporates and would like to display that faith by providing debt, whether it be to banks, government or corporates, but the foundations for developing a sustainable market are not yet there.

“While former Secretary to the Treasury Ken Henry rightly said at ASFA’s Investment Interchange that there is a need for super funds to consider their overall allocation to equities, it is important to understand that the discussion on the role of fixed interest investment in superannuation portfolios is not about the relative attractiveness of bond investments today.

“What the industry needs to be debating is the long-term structure of superannuation portfolios and the appropriate place of fixed interest investments, given the changed investment landscape and ageing demographics.

“As Doug McTaggart, chief executive of QIC said during his presentation at ASFA’s event, super funds can invest in bonds overseas if they want to. The discussion we’re trying to have is what, if anything, can be done to ensure we can develop the market here and ensure super funds can invest in domestic bonds and enable Australian corporates to have a choice of funding. This is heightened as Australian banks are finding it more difficult to access overseas debt.

“What is being missed in the public debate is that whether it’s equity or debt, the underlying investment is still in Australian corporates.

“The role of super in fixed interest is part of the wider conversation on how we ensure that the super pool drives the economy, drives sustainable long-term returns and delivers adequate retirement incomes.”

For media inquiries, please contact:

Pauline Vamos, CEO, 0433 169 342

Rebecca Glenn, GM Marketing and Communications, 0416 170 439

Megan McDougall, Media and Communications Coordinator, (02) 8079 0849

About ASFA – the voice of super

The Association of Superannuation Funds of Australia is the peak industry body representing the superannuation and retirement industry. ASFA is the only organisation that represents all types of superannuation funds (retail, industry, corporate and public sector) and associated service providers. ASFA members manage or advise on the bulk of the $1.3 trillion in superannuation assets as at September 2011. Its members represent over 90 per cent of the approximately 12 million Australians with superannuation.