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Infrastructure investment conducive to annuities
The predictable long-term cashflows produced by infrastructure investments for superannuation funds will help support the delivery of annuity-type returns, according to a submission from Westpac to the Productivity Commission inquiry into public infrastructure.
The submission has pointed to superannuation funds as a key source of funding for infrastructure but suggested that the motivators went beyond the returns such investments would generate for members.
"One of the other drivers for the super sector to focus more on the infrastructure sector as an investment class is the changing demographics," it said. "Over the next 10 years or so, baby boomers will move into retirement phase and there should be greater demand for annuity-style returns in superannuation."
It said the infrastructure sector was ideally placed to deliver those annuity-style returns because the long-dated nature of the assets aligned with the long-dated nature of super funds' liabilities.
"Superannuation funds have recognised that the infrastructure asset class is capable of producing predictable long-term cashflows with strong consumer price index linkages, and as such, is a good investment hedge to support the payments to its members," the Westpac submission said.
It said that there was no shortage of equity support from superannuation funds for good infrastructure projects and that ongoing support from Australian super funds as well as foreign pension funds remained critical to the private sector funding of infrastructure projects.
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