Super bosses plan China tour to scope investment
The trip comes as industry super funds, which account for nearly a third of Australia's $1.6 trillion superannuation industry, seek to increase their exposure to overseas markets.
Tom Garcia, the chief executive of the Australian Institute of Superannuation Trustees, said the fact-finding mission was designed to allow funds to make informed investment decisions.
"Super is already the same size as the Australian GDP, there will be a point where the money will have to move overseas, just because of the volume," he told BusinessDay.
Australia's superannuation industry is expected to nearly double to $3 trillion by the end of this decade.
"It is the time to go and really investigate China," Mr Garcia said.
AustralianSuper, which has $65 billion under management, established an Asian advisory committee headed by Bernie Fraser last year. It seeks to invest about 10 per cent of its funds in Asia by 2016.
Sam Sicilia, the chief investment officer of $13 billion Hostplus super, said the fund has been eyeing the Chinese market for four years and recently made some investments there. "We set about trying to address myths [about the Chinese economy], either confirming them or dispelling them. Because when a board makes decisions on behalf of what it believes rather than facts, you have a sub-optimal outcome," Mr Sicilia said.
The Hostplus board mandated a Shanghai-based American private equity fund, Siguler Guff, to invest $100 million in Chinese companies that were about to be listed on stock exchanges.
But the board was not comfortable with the proposed investment in Chinese retail projects and proposals were shelved.
Mr Sicilia is upbeat on China but acknowledged there were risks linked with the country. The key is to "invest selectively and one project first," he said. "Rushing to any jurisdictions you don't understand is fraught with dangers."
Frequently Asked Questions about this Article…
Top executives from 30 industry super funds are planning a China study tour next year to examine a range of investment opportunities in Australia’s biggest trading partner. The trip is described as a fact‑finding mission to help funds make informed investment decisions about China.
The tour involves executives from 30 industry super funds that collectively represent about $350 billion under management. These industry funds account for nearly a third of Australia’s $1.6 trillion superannuation industry.
Industry super funds are increasing exposure to overseas markets because Australian superannuation is growing rapidly — it’s roughly the same size as Australia’s GDP and is expected to nearly double to about $3 trillion by the end of the decade — meaning funds will need to move more capital overseas due to volume and diversification needs.
AustralianSuper, which has about $65 billion under management, set up an Asian advisory committee led by Bernie Fraser and seeks to invest roughly 10% of its funds in Asia by 2016 as part of its wider Asia strategy.
Hostplus, with about $13 billion in funds, has been assessing the Chinese market for four years and has made some investments there. Its board mandated Shanghai‑based American private equity fund Siguler Guff to invest $100 million in Chinese companies about to list on stock exchanges, while other proposals — such as investments in Chinese retail projects — were shelved.
Fund leaders warn there are risks in China and stress the importance of being selective. Sam Sicilia said funds should ‘invest selectively and one project first,’ and cautioned that rushing into jurisdictions you don’t understand can be fraught with dangers. The study tour is intended to dispel myths and base decisions on facts.
According to Tom Garcia of the Australian Institute of Superannuation Trustees, the mission is designed to give funds first‑hand information so boards can make decisions based on facts rather than assumptions — reducing the chance of sub‑optimal outcomes driven by belief or myth.
For everyday investors, the push into China and Asia indicates funds are seeking diversification and growth opportunities as the pool of superannuation capital expands. The emphasis on fact‑finding and selective investment suggests funds aim to balance potential returns from China with careful risk management on behalf of members.
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