Australian superannuation funds could more than quadruple the amount they have invested in infrastructure over the next 14 years, a new report commissioned by the Association of Superannuation Funds of Australia (ASFA) reveals.
The report, produced by the Allen Consulting Group, indicates that by 2025 superannuation funds regulated by the Australian Prudential Regulation Authority might have some A$200 billion (€146 billion; $211 billion) invested in infrastructure, up from the roughly A$45 billion they have currently invested in the asset class.
This growth in infrastructure investments would come solely on the back of a projected increase in the amount of funds in the superannuation system, which is expected to rise to A$1.5 trillion in 15 years’ time. It does not take into account a possible increase in the size of superannuation funds’ allocations to infrastructure, which ASFA currently estimates at an average of 5 percent of their portfolios, although it admits some estimates put that figure at a lower 3 percent.
ASFA also points out that, presently, “only less than a third of all superannuation funds have a significant exposure to infrastructure” although it predicts that “more and more superannuation funds [will] allocate part of their portfolios to infrastructure investment”. The association adds that “larger industry, corporate funds, and public sector funds often have more than 5 percent of assets allocated to infrastructure”.
About A$200 million in tax breaks reserved for private sector infrastructure investments in Australia’s 2011 budget should also make life easier for superannuation funds looking to jump into the asset class. “All of the indicators are there that it’s going to be easier for the super pool to invest in infrastructure,”' Pauline Vamos, chief executive of ASFA, told the Sydney Morning Herald, an Australian newspaper.
The report also supports the government’s plan to increase workers’ mandatory superannuation contributions from the current 9 percent to 12 percent.
To view the full report from the Allen Consulting Group, please click here.