To finance business lending, a push for superannuation funds is at a tilting point especially after the value of bank loans were overtaken by the size of the compulsory retirement savings system, said by the National Australia Bank’s executive Mike Baird. To increase their exposure to business lending as a group of business leaders supported a move to encourage super funds, Mr. Baird said Australia was likely to follow, countries overseas were moving in this direction.
Mr. Baird highlighted the value of long-term partnerships between super funds and banks which was organized by Visy Industries executive chairman Anthony Pratt, in a super fund forum and facilitated by Fairfax Media. About $2.8 trillion is the combined value of loans, which is valued to be slightly less than the current amount held in superannuation, to non-financial corporations, home loans, and credit card and personal loans.
Backed by the head of Westpac’s institutional bank, was his support for the idea. With the nation’s largest superannuation fund, AustralianSuper, Westpac recently helped arrange a 10-year bond deal. To expand the availability of debt and loans and expand the market, the company sees the growth in FUM in super creates a tremendous opportunity, said Ms. Cobley.
In a Sydney apartment overlooking the Opera House, Mr. Pratt, said since he started asserting the idea with former prime minister Paul Keating, in the last 18 months there had been considerable progress in super fund lending to business. After Pratt USA’s borrowing from US pension funds, Mr. Pratt came across the idea, which have a far greater share of their assets in business loans.
Mr. Pratt said, highlighting the opportunity for super funds to finance investment, the idea was one of nation building, in infrastructure, manufacturing, defence or clean energy. It was ideal for such projects meant by the long-term nature of super, he said. Mr. Keating said the idea should also appeal to funds, as more members move from the accumulation to the pension phase, which have a greater need to assets with more predictable long-term returns.
To need a shift away from growth assets, as the demographics shift into the pension phase. As its curbed banks’ appetite for lending to business, Mr. Pratt suggested what may further stimulate super fund lending to businesses is the royal commission into banking misconduct.
These loans are liquid or easy-to-sell, whereas funds must be able to meet member redemptions when requested, one of the hurdles to wider super fund lending to business is this fact. To attract more capital into the market, creating a vibrant secondary market in funds’ loans to businesses would go a long way. Tanarra Group, founder and principal, John Wylie said his firm which had produced returns of 8 per cent a year, had raised about $300 million funds for this type of lending.
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