Ordinarily, the Liberal Party of Australia is no fan of government intervention in the free market. But such is the bizarro world of superannuation politics that the principle seemingly does not apply to APRA-regulated funds.
NSW Liberal Senator Andrew Bragg has kicked off the perennial “super wars” particularly early in 2024 as he gears up for a fresh parliamentary review of the sector and the Coalition sets up super policy as a potential battleground issue for the next election, which could take place as soon as this year.
In what he at least acknowledged would be a “dramatic step”, the former FSC staffer told The Australian this week that Australia should consider placing a cap on ownership of individual equities by funds.
“It would apply to major super funds and would only allow ownership of 10 per cent of the total stock on issue in an ASX-listed company,” he said. “This way, Canberra’s Frankenstein could not eat up the whole local exchange and use it for political or semi-political purposes.”
He gave AustralianSuper’s successful campaign against the proposed takeover bid for Origin Energy by a consortium led by Canadian investor Brookfield as evidence that super funds are getting too big for their boots, claiming it was “likely” that “retail shareholder value was destroyed” by the move.
It is undoubtedly true that the largest super funds are rapidly expanding their influence over the sharemarket and economy. It is also true they hold sway in Canberra – via their politically connected chairs, directors, staff and external lobbyists – and can influence public policy. The government’s shock eleventh hour endorsement of much of the Quality of Advice Review provides recent evidence of that. They also face some serious challenges, such as rising consumer complaints.
But capping the amount of an asset they can hold for reasons other than competition law goes way too far and is entirely unjust given presumably no such imposition would be placed on asset managers or other investors operating outside super.
It also undermines the Coalition’s criticism of the government for encouraging funds to invest in a range of social and national causes such as renewable energy and housing supply, which some of its members have derided as “woke capital”.
If it is wrong for the government to intervene in the investment process to aid decarbonisation, surely it is just as wrong for it to intervene in the market to curb the perceived power of some investors.
The hypocrisy is of course entirely political. While the headline speaks of the “political clout of super funds”, Bragg’s substantive issue is clearly with profit-for-member industry super funds. He said as much in his op-ed for The Oz.
“Given the board dynamics of industry super funds, there is always the risk of union interference in the funds,” he wrote.
Trade unions do of course continue to hold influence over most industry funds, and this relationship provides them with a source of power in an age of declining membership.
But it seems absurd that the federal Coalition has no issue with offshore private equity investors buying up one of Australia’s main providers of critical energy infrastructure in Origin, but questions the legitimacy of AustralianSuper as an owner of that asset because of historic ties to the ACTU and a few board seats.
Indeed, it ignores the fact that AusSuper did not reject the deal alone. It won the hearts and minds of many fellow investors, especially mum and dad retail investors who worried about the prospect of foreign ownership. Plus, many industry super funds other than AusSuper were understood to have been in favour of the takeover bid.
And that is the point. While there is some truth to the narrative of a cosy relationship between big super funds and Canberra, especially during a Labor administration, investment teams privately bristle at the interference from both sides.
CIOs are not political animals by and large and must be freed up to focus on their investment objective and returns to members.
While no-one will be surprised about the prospect of more policy tinkering or parliamentary debates about super, the one element that must be protected at all costs is the fiduciary duty of trustees to members.
Messing with that legal vow would create a far worse “Canberra’s Frankenstein”.