Superannuation funds should invest in Australia's bond market and supply debt financing directly to the non-corporate sector, according to presenters at the Association of Superannuation Funds of Australia's (ASFA) Investment Interchange.
ASFA has partnered with the Australian Securitisation Forum and Treasury Association to discuss the role of superannuation in Australia's fixed interest markets, particularly how super funds can help develop Australia's corporate bond market.
Financing corporate debt will provide alternative funding to smaller companies that normally rely on bank and overseas funding, executive director for markets group from the Federal Treasury, Jim Murphy, said.
Murphy said the Government was listing Commonwealth Government Securities to provide a platform for debt financing, as well as simplifying disclosure and liabilities for those issuing debt.
"The development of a corporate bond market would principally fund medium-sized Australian companies. It is much more difficult for smaller companies to go offshore to raise capital. A vibrant debt market would provide that facility," he said.
"The bottom line is that a debt market would be a very useful diversification for Australia's financial system," he said.
Murphy said the superannuation system, which is almost 100 per cent of gross domestic product (GDP), has a social and economic role to play, impacting the economy as a whole.
Former Treasury secretary Ken Henry said focusing on growth strategies during the accumulation phase and more conservative strategies during the decumulation phase exposes members to sequencing risk and isn't always necessarily the best strategy.
The Investment Interchange project is designed to identify and make recommendations regarding policy and market factors that inhibit the allocation of superannuation and broader market investments to the domestic fixed income asset class.
ASFA said the project was necessary as more Australians moved out of an accumulation phase, creating greater demand for less volatile investment returns, and because of the expectations of the superannuation pool to play a broader role in the society and economy.
