The cashed-up $630 billion industry fund sector will need to convince state governments to collaborate on greenfield infrastructure projects, provide more corporate debt and pursue global opportunities as it seeks to deploy rapidly increasing inflows from super fund members turning away from besieged retails funds.
That is the view of former Labor minister and ACTU secretary Greg Combet who on Wednesday was appointed the new chair of $113 billion IFM Investors, replacing outgoing chair Garry Weaven who will step down at the end of this month.
“The Melbourne Airport rail link is one example that is a market-led proposal in which IFM is leading a consortia where we put in a proposal to the state government,” he said, adding they were keen to see how the proposal would be received.
“We will be thinking more along those lines to identify opportunities where we can deploy capital in the domestic economy in a way that will return solid returns for members and meet infrastructure needs.”
Industry funds’ asset holdings climbed to $632 billion – up from $622 billion – in the June quarter, outpacing retail funds for the first time on the back of the royal commission hearings, a pattern which outgoing chair Weaven told Investment Magazine this week would continue.
The Melbourne airport rail project would see a $15 billion rail link built between Southern Cross Station and Melbourne Airport. A consortium called AirRail Melbourne encompassing IFM Investors, Melbourne Airport, Metro Trains Australia and Southern Cross Station submitted the proposal in September.
Combet conceded there were currently no large-scale infrastructure projects in Australia that compare with this year’s successful bid by an AustralianSuper, Transurban consortium, beating out IFM Investors, for a 51 per cent stake in WestConnex, the largest road infrastructure project under way in Australia.
“There is nothing of that nature immediately on the horizon in the domestic infrastructure market and what it means is that there is a lot of capital. We will be looking to work as much as we can with governments that are facing large infrastructure needs, in particular, with congestion in cities and the needs of regional areas,” he said.
“We are also engaging with the business community as appropriate to try and do more collaborative efforts to develop infrastructure, and that will mean getting engaged more than we have historically with potentials in greenfield.”
Continuing to build its global capacity will subsequently remain a necessity, with the $2.7 trillion super sector tipped to grow to three times the size of GDP by 2030, according to Combet.
“The retirement savings system, the pool of capital that that represents, has to look for global opportunities to invest,” he said.
“With recent developments in light of the royal commission hearings and the Productivity Commission, it is the case that industry funds are experiencing significant increases in their net flow – and they are significant. We’re talking about billions of dollars. Each of the member funds of IFM ad ISA I’ve spoken to… say they are all experiencing this.”
Outgoing chair Weaven has been vocal about the potential for industry funds to be more involved in corporate debt, as bank lending restrictions remain tight.
On this Combet said: “IFM Investors has been in corporate debt for quite a long time, 20-odd years now, and we’ll be looking for opportunities in that area.”
IFM Investors has 350 investors around the world, with around 270 of those based offshore.