Australian superannuation funds have an opportunity to position themselves as the most trusted and reliable source of very long-term investment capital in the world, but competing against pension funds from other countries that dwarf them in terms of scale means local funds will need to bring other competitive advantages to the table.
IFM Investors global head of external relations David Whiteley told the Investment Magazine Chair Forum earlier this month that funds need to better actively and collectively promote Australian superannuation capital as “the most trusted and the most reliable in the world”.
“Being regarded as the most trusted, reliable, long-term form of capital to markets and governments globally will contribute to us getting access to the best deals, and the best networks,” Whiteley said.
“We need to work together on how we address systemic risks, find the opportunities at a national and global level, and promote our system as the most reliable and trusted source of capital to ensure that we’re getting the best deals for our members.”
Whitely said Australian funds are unrivalled in the world in terms of their track record “not only as delivering great investment returns back to members here in Australia, but how [we are acting] as custodians of the assets that we invest in globally”.
“What’s critical to the Australian superannuation system, and particularly the all-profit-to-member system, has been that member orientation,” he said.
“Alongside that has been a culture that recognises as long-term investors we need to ensure we’re meeting the expectations of the public as well.”
Whitely said Australia currently has the world’s sixth-largest pension system, but it’s the fastest-growing system in the world, expected to reach $9 trillion by 2040, and within that, industry or all-profit-for-member funds are the fastest growing sector, projected to account for about $3 trillion by 2030 and $6.5 trillion by 2040.
Small players on the world stage
Australian funds have become dominant in a local context, but they will never rival the largest funds in the world on scale alone – the Government Pension Investment Fund of Japan (GPIF), for example, with assets of $US1.7 trillion ($2.6 trillion), is on its own almost three-quarters the size of the entire Australian system.
Australian funds will be required to compete against much larger funds to gain access to the best deals and secure the best assets. While that’s going to be a significant challenge, they do boast distinct competitive advantages.
“It does go to the esprit de corps that, for example, is evident in this room and the esprit de corps that is evident within the system more broadly, and the member orientation and the inventiveness that this system and the people within this system have had now for three decades or more,” Whiteley said.
Whiteley said the future he is imagining for Australian funds is ambitious. He said how effectively funds deploy the capital at their disposal will depend on the calibre of the individuals responsible for making those decisions in 10, 20 or 30 years’ time.
“It is our job now to make sure that we do our level best to make sure that we’re building the relationships and building the brand and building the capabilities and building a reputation globally to ensure that in 10 years’ time those advantages can be taken care of,” he said.
“And I place immense confidence in this unique form of capital, this system we’ve got in Australia. I place immense confidence that we already are, and we will be, attracting the very best human capability to come and work for our funds in the long term.”
