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ASX too rigid for innovation investing
Superannuation funds investment opportunities are being stifled by the dominance and concentration of mining and resource stocks listed on the ASX, according to Gordon Noble, director of advocacy and policy strategy for the Association of Superannuation Funds of Australia (ASFA).
Speaking at the Ausbiotech Conference 2012, Noble said the ASX needed to undergo structural changes to counteract the uneven spread of liquidity across the stock exchange and to encourage super funds to invest more into emerging innovations, including biotech.
The strength of the resources sector was in part built on the back of JORC, an industry initiative which became a legislated part of the ASX and gave investors confidence in their investments, according to Noble. He questioned if the same lessons could be replicated for innovation companies such as biotech.
"Specifically, is there the potential for the ASX to develop an assurance approach, based on the model of JORC, that would address one of the significant issues for investors, which is to be able to verify the science behind an innovation company?" he asked.
He said the proliferation of dark pools and proposed changes to ASX clearing and settlement were also concerns in regard to the impact on liquidity and on super funds' ability to invest in those companies in light of legislative requirements for liquid investments.
ASFA would work with the biotech industry to better understand the challenges to investing, Noble said. He said ASFA's concern was in providing liquidity and diversification in the ASX.
"A diversified ASX provides superannuation funds with a broad range of investment opportunities that funds can invest in according to their different risk and return objectives. By contrast, if the ASX continues to concentrate around mining and resources company stocks, then this is ultimately likely to impact on the allocation by superannuation funds to Australian equities," he said.
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