Super to look to infrastructure: report

SUPER funds' investments in infrastructure could increase more than fourfold to $200 billion by 2025, helping the country overcome bottlenecks caused by the mining boom, a report says.

By InvestSMART · 17 Aug 2011

By InvestSMART ·
17 Aug 2011

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SUPER funds' investments in infrastructure could increase more than fourfold to $200 billion by 2025, helping the country overcome bottlenecks caused by the mining boom, a report says.

Amid questions over Australian funds' high exposure to shares, the Allen Consulting Group report says government policies and industry mergers are pushing funds towards backing infrastructure such as ports, roads and airports.

The report, commissioned by the Association of Superannuation Funds of Australia, said the $45 billion funds now held in infrastructure could swell to $200 billion by 2025, based on projections.

Chief executive Pauline Vamos said that after the recent wild ride for fund members caused by sharemarket volatility, growth was a reminder of the "real investments" that super funds held.

While the report did not predict a change in asset allocation, Ms Vamos said policy changes and mergers between funds made infrastructure a more viable option.

"Large funds are much more able to invest in unlisted assets because they have the ability to keep more liquidity," she said.

Government plans to allow fund members to move into retirement "seamlessly" without selling assets also encouraged funds to invest in infrastructure, she said.

"All of the indicators are there that it's going to be easier for the super pool to invest in infrastructure," Ms Vamos said.

As well, the budget provided a $200 million tax break designed to make infrastructure investment more attractive for

funds.

The report also found the government's plan to increase employers' mandatory super contribution from 9 per cent to 12 per cent would add 0.33 per cent to the economy's size in 2025.

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Frequently Asked Questions about this Article…

What does the Allen Consulting Group report say about super funds investing in infrastructure?

The Allen Consulting Group report, commissioned by the Association of Superannuation Funds of Australia, projects that super funds' infrastructure holdings could rise from around $45 billion today to about $200 billion by 2025 — more than a fourfold increase — driven by government policy settings and industry changes.

Why are Australian super funds being pushed toward infrastructure investment?

The report says government policies, industry mergers and recent changes (like rules allowing seamless moves into retirement without selling assets) are encouraging funds to back long‑life assets such as ports, roads and airports, and large funds have the scale and liquidity to invest in unlisted infrastructure.

How much could superannuation investments in infrastructure grow by 2025?

Based on the report's projections, infrastructure holdings by super funds could increase from about $45 billion currently to roughly $200 billion by 2025.

What types of infrastructure assets are super funds likely to invest in?

The report highlights traditional transport and logistics assets as likely targets, naming ports, roads and airports as examples of the infrastructure super funds may back.

How do mergers and size of funds make infrastructure investment more viable?

According to Pauline Vamos in the report, larger merged funds are better able to invest in unlisted assets because they can retain more liquidity and manage long‑term, illiquid positions that infrastructure investments often require.

Did the budget include any tax incentives to encourage infrastructure investment by super funds?

Yes — the budget provided a $200 million tax break intended to make infrastructure investment more attractive for super funds.

What did the report say about mandatory super contribution increases and the economy?

The report found that the government's plan to lift employers' mandatory super contributions from 9% to 12% would contribute about 0.33 percentage points to the size of the economy in 2025.

How did recent sharemarket volatility influence the push toward infrastructure according to the report?

After a 'wild ride' of sharemarket volatility, Pauline Vamos said growth in infrastructure holdings serves as a reminder of the 'real investments' super funds hold, and that infrastructure can offer a different, long‑term exposure compared with listed equities.