Planners cited as limiting infrastructure investment
Industry Super Australia (ISA) has cited the relationship between financial planners and their clients as one of the reasons why retail superannuation funds are not big investors in infrastructure.
The claim is contained in an ISA submission to the Productivity Commission inquiry into public infrastructure, which also argues that industry funds are uniquely placed "to sustain relatively illiquid investments such as infrastructure".
It said this was because their "members' long-term investment time horizon aligns with the long-term life-cycle of such investments".
It claimed the Australian Prudential Regulation Authority (APRA) had found that not-for-profit funds such as industry superannuation funds had characteristics which could sustain a relatively high level of illiquid investment due to scale, member demographics and strong cash flows.
"Importantly, the structure of industry super funds provides additional flexibility to make strategic investment decisions on behalf of members. Such flexibility is diminished in the retail super fund and SMSF environment because investment decisions are normally left up to individual retail-level financial advisers and their clients," the submission said.
"Nevertheless, if other sectors of the superannuation industry invested to the same extent as industry super funds in infrastructure, an additional $100 billion would be available for investment," it said.
"In addition to capturing higher risk-adjusted returns, unlisted investments allow greater control over assets, including the ability to take a more active role in manager compensation and investor protection."
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