POWERED BY MOMENTUM MEDIA
More work needed on infrastructure
Tax incentives announced in the Federal Budget recently aimed at making infrastructure investment more appealing to super funds may help but fundamental changes to the underlying format of the investment are needed.
That is the major finding from separate papers released by the Association of Superannuation Funds of Australia (ASFA) and Towers Watson in the past week, with ASFA’s Challenges of Financing Infrastructure making a number of key recommendations to address the issue.
These included: the establishment of a centre for excellence for infrastructure investment; the establishment of a 20-year national investment pipeline; and a new approach to developing infrastructure investment opportunities to enable smaller investors to access infrastructure investments in ways that suit a variety of investment profiles.
The paper lists the ageing population, the number of mergers, the introduction of MySuper, and a move away from describing risk according to asset class as possible impacts on the potential for future infrastructure investment.
“There has been a lot said about the potential of super funds to finance infrastructure and we have been speaking with Infrastructure Australia and infrastructure partnerships for a while on this,” said ASFA chief executive Pauline Vamos.
“But better planning is needed and the superannuation industry must have a permanent seat at the table for these discussions,” she said.
Towers Watson’s Investing in core infrastructure paper grouped infrastructure assets under ‘core’ and ‘opportunistic’ segments to give further clarity around the potential outcomes, which can vary significantly between the classes.
The challenge for the industry is to create a fund structure that maximises the chance of capturing the ‘core’ characteristics of infrastructure, such as realistic and sustainable target returns comparable to equities; and sustainable debt structures, according to Towers Watson.
Allocations to core infrastructure should ideally be via a stand-alone asset class or as part of a broader asset class that includes other ‘real’ assets such as core property, whereas ‘opportunistic’ infrastructure investments should compete with other return seeking assets such as private equity, the firm stated.
Recommended for you
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Coalition, which has pledged to reverse any changes if it wins next year’s election.
In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges.
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
