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Call to lower barriers to SMSF infrastructure investment
Now is the time to remove legislative and regulatory roadblocks to self-managed superannuation funds (SMSF) investing in infrastructure, according to the SMSF Association.
SMSF Association chief executive, Andrea Slattery said that in circumstances where both the Government and the Opposition were focusing on infrastructure, there was an urgent need for the barriers to SMSF investment in the sector to be removed.
"Although the SMSF sector has nearly $600 billion in FUM [funds under management], it is effectively barred from investing in infrastructure," she said.
"This is despite the fact that infrastructure assets have an obvious attraction for SMSF trustees who are looking for long-term investment horizons and healthy yields in a low interest rate environment."
Slattery outlined the main obstacles to SMSFs directly investing in infrastructure as being:
- The high dollar price tags that effectively ruled out SMSFs (the average SMSF has slightly more than $1 million in FUM), making infrastructure investment solely attractive to institutional investors;
- Illiquidity. Although SMSF trustees are "sticky" investors, they need to be able to trade their holding if market conditions or financial circumstances change; and
- The high entry and exorbitant ongoing management fees these investments can attract, which is a strong negative for trustees.
"These issues have proved an insurmountable barrier to entry in the past, but from the Association's perspective, there is no logical reason why this has to be the case," she said.
Slattery said that some of the solutions had been outlined by the SMSF Association in its Financial System Inquiry (FSI) submission, including offering unitised investments in smaller parcels or infrastructure bonds.
She said another possibility was ASX-listed infrastructure funds but whatever mechanism was chosen, it needed to be remembered that SMSF trustees preferred to invest directly, with total SMSF investment in managed funds now standing at only 5.1 per cent.
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