Private capital plays a vitally important role in investing into businesses of all sizes, and in almost every industry sector of the economy.
We felt it necessary to highlight the important enabling role that government must play in ensuring we have the right policy settings in place to create a more productive and innovative economy.
The Australian Investment Council represents the $30 billion private capital industry which raises capital from domestic and offshore investors, including superannuation funds, sovereign wealth funds, overseas pension funds and family offices.
In our recently published policy blueprint, Investing for Growth – Policy Proposals for the incoming Federal Government, we are calling on the political leaders who form the next government to get to work quickly on creating an environment that will help boost the flow of capital into Australian businesses.
Private capital fund managers partner with businesses of all sizes to help management teams fulfil their companies’ potential and execute on their growth and expansion strategy, or to navigate risk and uncertainty. Private capital funds regularly meet those funding and experience gaps, providing crucial support at critical stages of a company’s life cycle.
Removing roadblocks to greater levels of superannuation investment into private capital; accelerating the introduction of a new collective investment vehicle – such as a limited partnership – and providing stable tax and regulatory settings to existing vehicles, are just some of the ways to help improve the flow of capital.
Despite the strong investment returns of private capital, super fund allocations into this high-performing asset class remain below that of peers overseas and other pooled investment funds such as the Future Fund, which currently has 15.4 per cent of its fund allocated to private capital investments.
One of the priorities for us as a nation is to work with government to shift superannuation policy settings over time to allow super funds and the community to focus more of their attention to achieving competitive after fee returns.
Removing the regulatory hurdles that get in the way of greater levels of investment in value adding asset classes like private capital will boost the retirement savings for super fund members, drive productivity and reduce dependency on the social security system.
Some of the recent changes to fee and cost disclosure regulations have the effect of further entrenching this one-sided focus, which ultimately can have unintended consequences for superannuation funds, fund members and the economy more broadly. We have to do a better job of instilling greater balance in the incentive structures that sit around the system.
On top if this, some aspects of Australia’s legal and tax framework for private capital investment are inconsistent with international best practice.
We believe that developing and legislating a world-class limited partnership collective investment vehicle will help to attract more investment into our market from offshore institutional investors who see some of our tax frameworks as being out of step with contemporary international practice.
We must also ensure that Australia’s foreign investment policy regime remains competitive. The globalised marketplace that we operate within means we have to bring confidence back to our foreign investment policy regime, and ensure we have a very clear and consistent ‘open for business’ mantra through what we say and how our policies are set in this area.
These are just some of the 13 policy recommendations we have set out in our policy blueprint, and the incoming Federal Government must get on with the task of implementing meaningful reforms to unlock greater levels of private capital investment. As a nation, we really don’t have time to waste– the future of our economy depends on it.