First State Super and State Super, who together manage about $60 billion, are talking about the potential of investing in New South Wales infrastructure, says Nick Greiner, chairman of Infrastructure NSW.
“The question is: how do you get superannuation funds to be early stage infrastructure investors,” says Greiner, who was NSW Premier between 1988 and 1992.
“Superannuation funds are more natural holders of infrastructure than many others,” he says.
Australia’s superannuation funds currently have about $65 billion invested in infrastructure, according to Karen Chester, a partner at consultants Mercer. Using leverage this investment is probably about $190 billion.
Chester expects $120 billion of equity and $340 billion with leverage to be invested by superannuation funds by 2023.
“From our experience the constraint to super funds investing in infrastructure is not illiquidity considerations but the availability of bankable projects,” says Chester.
RREEF Alternative Investments, Deutsche Bank AG’s infrastructure investment business, says superannuation funds in 2012 maybe more interested in such investments than many others.
“In the last six to 12 months there has been increasing interest in the sector,” says Michael Robinson, head of acquisitions for RREEF Australia which manages $2.2 billion in assets.
“Allocations are opening up and investors are more attracted to it than to other sectors that are causing grief,” he says.
Infrastructure investments comprise about 5 per cent a superannuation fund’s assets, says Chester.
Robinson says the over-leveraged infrastructure deals where investors sometimes over paid for assets that were not considered strictly infrastructure, such as ferries, are now a thing of the past.
Greiner says there “isn’t a single model that makes sense” for infrastructure investors.
“We’re open-minded and flexible as to how the government can change its behaviour to encourage superannuation funds,” says Greiner.
But he says “only two sets of people can be considered the final payers: users or tax payers.”
NSW has as much as $50 billion in transport infrastructure needs, a “massive backlog of health” infrastructure and an urgent need to “upgrade poles and wires” that will cost $5 billion per annum over the next five years, says Greiner.
He says NSW has done a “bad job” at infrastructure planning.
“If John Bradfield, who oversaw the design and construction of the Sydney Harbour Bridge, had a 50-year plan infrastructure plan for Sydney, Victoria has a 10 year plan and Queensland has a seven year plan, NSW had a minus three year plan,” says Greiner, who perhaps was being only partly ironic.