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Superannuation Funds To Eventually Become Australia’s Largest Institutional Investor

Post by Sharat on March 18, 2010 · Under News · Comment 

Australia’s superannuation industry, estimated to manage $1.2 trillion in assets, will eventually have to assume a leadership position as the country’s largest institutional investor as it increases in size by more than four fold over the next two decades.

Speaking at a conference on the superannuation industry held in Brisbane on Wednesday, The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen said the industry faces over the next two decades, the twin challenges of ensuring that the system is able to deal with an ageing population, and managing the system’s exponential growth.

“A big strength of the super system will be its exponential growth over the next 20 years — it will grow and exceed GDP and it will be one of our great assets. Therein lies a challenge, and we need to ensure that great asset is used to maximum advantage for the Australian economy and that we don’t squander the opportunities that exponential growth in funds under management will provide.” he said in a video statement.

Assets managed by Australia’s superannuation system are currently valued at approximately $1 trillion and are expected to grow to $5 trillion by the year 2025.

Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia says the industry would ultimately become the largest Australian institutional investor, a position that would grant it significant leverage over the economy.

“How we manage that responsibility as investors in the whole of the Australian economy, how we drive that, how we manage that and use that quite significant leverage responsibly so that we don’t scare the horses, is what will be our biggest challenge. Speaking with one voice and speaking responsibility is where we have to go over the next few years.” she said.

However large differences still remain in the sector, between industry and retail super funds.

David Whiteley chief executive of the Industry Super Network warned industry funds not to side with retail super funds in their response to proposals from the government’s Cooper review of the sector.

“What Cooper is trying to do is get rid of unnecessary fees and unnecessary costs — and the retail sector is, by and large, the source of that through the commissions system. They have a vested interest in derailing the Cooper review, and we have to make sure that doesn’t happen.” he said.

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