AustralianSuper CEO Paul Schroder has said the fund will stay globally diversified but could tip more money into Australia if governments speed up decisions and provide clearer, long-term settings – warning any mandated local investment quota would be “a disaster”.
AustralianSuper chief executive Paul Schroder said the government’s economic roundtable “was better than I was expecting”, praising the Treasurer’s ability to convene competing interests behind a common goal.
“I just stood back and thought, there wouldn’t be too many places in the world where the Treasurer could bring together all that many voices and thoughts, and everybody in the room was trying to do something better for Australia,” Schroder said on the ABC’s 7.30 program.
The country’s largest super fund has a significant local footprint – about $97 billion in Australian equities and $30 billion in domestic infrastructure – but, like its peers, it is hunting returns wherever they can be found.
More than half of AustralianSuper’s projects are overseas, a reflection, Schroder noted, of Australia’s small share of global markets and the need to diversify.
“We need to have a globally diversified portfolio … We have to be both in Australia and the rest of the globe as well,” he said.
Pressed on whether the fund could do more at home, Schroder pointed to the investment environment, not risk appetite.
“No, no, Australia is a very stable, very thoughtful economy, and has plenty of opportunities. As I mentioned, we invest very heavily in Australia, but it is important too that we diversify the portfolio,” he said.
For Schroder, the fastest way to crowd more superannuation into local projects is to reduce approval friction and lock in predictability.
“With more policy certainty and with much quicker decision-making by regulators and an alignment between investors and government, you could do more and you could do it more quickly.”
He wants transparent, timely decisions – yes or no – and clear long-term settings in priority areas.
“We need to be in a situation where governments of all tiers can make decisions more quickly, whether that is a yes or no, knowing that is really important. Having the right settings about the long term is really important … for example, housing … The single most important thing the government could do is to say at all levels of government, ‘We are going to make it much easier and much more clear-cut’.”
What he emphatically does not want is a mandated domestic allocation.
Asked about the idea of a 5 per cent quota, Schroder was blunt: “It would genuinely be a disaster if the government reached in and said something about that.”
Australia comprises only about 2 per cent of global equity markets, he observed, arguing the portfolio must reflect that reality.
“You might say it the other way around – why aren’t we investing less to have a global balance. The reason for that is, we’re very committed to the Australian economy and Australian jobs.”
Sharing further insights into the discussion had at the roundtable, Schroder said participants canvassed ways to make Australia a bigger player in the digital economy, including data centres – an area AustralianSuper is watching closely.
The message from Schroder: line up the policy, speed up the decisions, and the capital will follow.
On the world’s biggest market, Schroder said the US “has been a ‘brilliant place’ to make money over the last century”, but flagged a shifting backdrop. “I think what we’re seeing is a little bit more policy uncertainty drifting in and it’s really important for investors to have long-term confidence in policy settings.”
Channeling capital into the economy
Asked how to best channel private capital into the economy, AMP chief economist Shane Oliver said he broadly supported easing regulatory burdens and lowering taxes.
“Anything you can do to lower the tax burden and give more certainty about government policy, and reduce the level of regulation, I think that’s probably the key here,” he said on an upcoming episode of the Relative Return Insider podcast.
On super funds more specifically, Oliver agreed with multiple voices in the super industry calling for performance test reform, urging the government to ensure the test is “operating appropriately” – meaning that it is not discouraging funds from investing in local opportunities.
The chief economist also more broadly pushed for regulatory relief for super, noting that oversight of the sector expanded in the aftermath of the GFC.
“A lot of that lead to overregulation … It also led to the performance test where super funds found themselves herded into similar strategies. There’s always a pressure to do that because of the competitive focus,” he said.
“There’s also the issues where the lead times are long, the approval times on projects are long, so Australian super funds are putting more money overseas.”
Moreover, the chief economist noted that a shortage of domestic projects has also driven funds to look abroad for opportunities.
“Therefore, anything the government can do to make it easier to bring projects to market quicker, to get them into a state where they can be invested in … I think would be welcomed.”
