Tighter lending restrictions for banks present industry superannuation funds with a unique opportunity to capitalise and invest in long-term, illiquid, collaborative projects, M.H. Carnegie & Co. founder Mark Carnegie says.

Speaking in a one-on-one interview at the Australian Institute of Superannuation Trustees’ annual Super Investment Conference (ASI 2018), Carnegie spoke of the strategic advantages industry superannuation funds have in long-term investment.

This was a theme IFM Investors’ Garry Weaven had raised in an earlier panel, when he suggested funds might partner with banks that are shifting focus to lower-risk, or high-profit margin, areas such as transaction banking and residential banking.

Carnegie said the industry fund sector might also be able to capitalise on any findings at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“Everything I see in terms of APRA and the [Reserve Bank of Australia] RBA, and everyone else intervening in the market feels like it’s a gigantic opportunity for [industry super funds],” he said.

The banks are leaving super funds an opportunity, he explained.

“In terms of number one opportunity – about where you guys can put money – you’ve got a situation where the banks are absolutely scared witless as a result of the RBA,” he said. “And you guys are in a position to be able to [lend money] when, for the first time in my career, the Aussie 10-year [Treasury bond] is trading at a lower interest rate than the US 10-year.”

Carnegie said he supported greater collaboration among profit-to-member funds and challenged the sector to tackle “whole society profit opportunities” with big investments.

“How do you guys deal with what I call whole society profit opportunities, where the banks are out and you guys are in?” he asked. “I’ll give you a simple example. Everyone knows that early intervention in education for underprivileged people improves the individual outcome for that person who is from a disadvantaged home. Everyone knows it. It means that 10 and 20 years out, the society doesn’t have to pay any sort of social security, or [for] any sorts of problems, and they can get the revenue back.

“It’s a solid, low-double digit maybe high single digit return – on a historical basis – for the society. The question is, who is putting the money in and how, to actually get that return.”

Carnegie also cited aged care as a challenge that demands solutions that could generate returns for superannuation funds.

“My guess is 50 per cent more per capita GDP is available to Australians if we can find some way to overcome these collective action problems,” he said. “I know everyone in the room cares about being 50 basis points ahead of everyone else at the end of 10 years, because it’s going to make you feel great, but the truth is we could end up with our kids having an infinitely better life if we can act together.”

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