Construction industry super fund Cbus said it’s looking to spend an extra $1 billion in infrastructure globally, as record low interest rates continue to suppress returns in cash and fixed income.
Cbus head of infrastructure Diana Callebaut said the $50 billion fund is planning to increase its allocation in the asset class to 13 per cent, up from a current level of 11 per cent. She said the extra investment could help lift member returns by more than $350 million over the next decade.
“The economic outlook is not favourable,” Callebaut said at a conference at Parliament House in Canberra. “While not a panacea for the current environment, infrastructure will play an important role in ensuring our member’s returns are more resilient.”
Record low interest rates around the world has fuelled investor appetite for the asset class. Since 2008, global infrastructure capital has quadrupled to $520 billion, according to Callebaut. In Australia alone, profit-to-member funds have allocations of 10 to 15 per cent compared to a global average of 5 per cent.
“Infrastructure provides relatively high cash flow through the economic cycle and often provides inflation protection if required,” she added.
Callebaut said the super fund was “well placed” to deploy the extra capital, despite the competitive market and the limited supply of “scalable investable” infrastructure assets.
Cbus currently manages about 15 per cent of their total assets in house including infrastructure, but that number is expected to double by 2023, she said. Over the last 10 years, the fund has delivered returns on average of 9.39 per cent, she added.
Callabaut joined Cbus in 2016 from KPMG after the super fund announced plans to build an internal infrastructure team.