Government action is needed to ensure infrastructure projects are commercially viable before superannuation funds can be expected to invest in them, according to a panel of asset consultants.
Speaking at an Association of Superannuation Funds of Australia (ASFA) function, three asset consultants expressed their view that the main barrier to super funds investing in infrastructure was not funding, but how to pay for assets.
“Whether it is tolls, or taxes, or privatisation, none of those is particularly popular,” said Industry Funds Management’s global head of infrastructure, Kyle Mangini.
“Until we work out a way to pay for these assets, there is going to be a challenge for super funds investing in them” he added.
Mercer’s Karen Chester agreed, stating that there was plenty of equity and debt capital available, but the Government still had much work to do to figure out the best funding economics for projects.
Super funds currently invest around $65 billion in infrastructure, or about 5 per cent of their portfolios. Taking gearing into account, that amounts to about $190 billion in infrastructure assets that Australian super funds are already exposed to, with the number set to double by 2023, Chester said.
She estimated that between $450-$770 billion will need to be invested in infrastructure in the next decade to fund projects.
“But the reality is most of these projects will have economic merit, but are they commercially viable? And if they are not commercially viable, then there is really no role for superannuation funds to invest in them,” Chester said.
Colonial First State Global Asset Management (CFSGAM) asset manager Mark Rogers said the biggest problem facing investors was that the Government’s vision was too broad and wide ranging for it to be practical.
He said investors needed to see a four to five year vision that could be put into action and which addressed the issues of public policy, resourcing, labour shortages and regulation.
