Super funds off to China in search of prospects
The move comes as industry super funds, which account for nearly a third of Australia's $1.6 trillion superannuation industry, are seeking to further raise their exposure to offshore markets.
Tom Garcia, the chief executive of 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 [and] there will be a point where the money will have to move overseas, just because of the volume," he told BusinessDay.
Australia's super 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, the nation's biggest fund, as well as HESTA, First State Super and Hostplus are expected to join the China mission.
AustralianSuper, which has $65 billion under management, established an Asian advisory committee headed by Bernie Fraser last year. The fund seeks to invest about 10 per cent of its fund in Asia by 2016.
Sam Sicilia, the chief investment officer of the $13 billion Hostplus super, said the fund has been eyeing China 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," he said. "Because when a board makes decisions on behalf of what it believes rather than facts you have a sub-optimal outcome."
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. However, the board was not comfortable with the proposed investment project in Chinese retail projects. Proposals were shelved.
Mr Sicilia said the key is to "invest selectively and one project first" in China. "Rushing to any jurisdictions you don't understand is fraught with dangers," he said.
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Eighty industry and retail super fund executives representing about $350 billion under management plan a fact‑finding study tour of China next year to examine a range of investments. The tour is intended to help funds make informed decisions as industry super funds seek to raise offshore exposure because the size of superannuation is growing rapidly and will increasingly need opportunities overseas.
The article says Australia’s biggest fund AustralianSuper, along with HESTA, First State Super and Hostplus, are expected to join the China study mission.
Industry super funds account for nearly a third of Australia’s $1.6 trillion superannuation industry, and the overall super sector is expected to nearly double to about $3 trillion by the end of the decade.
AustralianSuper, which has about $65 billion under management, set up an Asian advisory committee last year led by Bernie Fraser and aims to invest roughly 10% of its fund in Asia by 2016.
Hostplus, a $13 billion super fund, has been eyeing China for four years and has recently made some investments there. Its approach is cautious and selective — aiming to test projects first, dispel or confirm myths about the market, and avoid rushing into jurisdictions it doesn’t fully understand.
Hostplus’s board mandated Shanghai‑based American private equity firm Siguler Guff to invest $100 million in Chinese companies that were about to list on stock exchanges. However, the board chose not to proceed with some proposed retail projects it was uncomfortable with.
Fund leaders say as superannuation pools grow — already comparable in size to Australia’s GDP and forecast to expand further — there will be a point when domestic opportunities are insufficient and some money will need to be invested overseas. China is being investigated as a major offshore market for diversification and potential returns.
The article highlights the risk of making investment decisions based on myths or beliefs rather than facts, and the danger of rushing into unfamiliar jurisdictions. Best practices mentioned include running fact‑finding missions, investigating to confirm or dispel assumptions, investing selectively, and starting with one project to manage risk.
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