Australian pension funds could consider increasing their investments in emerging markets such as Indonesia, if they can obtain federally backed insurance for high-risk investments, which can be seen as furthering the “objectives strategies” of Australia.
A document released by the Association of Superannuation Funds of Australia (ASFA), which follows a high-level super fund delegation to Indonesia, calls on the government to consider some form of risk sharing if super funds were to make investments majors abroad in the region. , especially in critical infrastructure projects.
He suggests this could be done by a special purpose vehicle that could provide insurance to institutional investors against risks above normal business risks.
“The Indo-Pacific offers opportunities for institutional pension funds to invest in quality critical infrastructure that would augment the funds’ infrastructure portfolios, while boosting the economic and community well-being of recipient countries,” a- he declared.
“To the extent that it is consistent with Australia’s broader strategic objectives in the region, the Australian Government could put in place mechanisms to offset the impact of certain market failures on the investment decisions of Australian institutional investors. , including pension funds.”
The document says that under the insurance proposal, premiums would be paid by investors in the super fund, but would be subsidized by the government, so the funds would only be subject to “normal business risks.” associated with a particular project”.
Speaking about the report, ASFA Director General Martin Fahy said Investment magazine The super funds were aware that there was a “real opportunity to deploy capital” in emerging markets in the region, particularly in Indonesia and India.
But he said the pensions industry had to be careful because it was required to act in the best financial interest of its members. He said it was essential that if funds were to invest in projects in these countries, they were “not exposed to unnecessary sovereign risk”.
ASFA’s comments on a possible risk-sharing arrangement for potential investors in the region were part of a larger document examining ways in which the sector could work more closely with government to invest in areas of national interest.
This follows a call from Federal Treasurer Jim Chalmers for super funds to seek ways to strengthen collaboration between the government and super funds on a range of national priorities, including building more affordable housing and initiatives that would help meet the federal government’s commitment. Australia would be net-zero carbon by 2050.
An ASFA statement released with the report says there could be opportunities for collaboration between funds and governments in areas such as affordable housing and climate change. He said there was a range of potential investment opportunities for super funds emerging from national economic transitions such as energy, digital infrastructure, affordable housing, healthcare and elderly care.
ASFA said there would be more opportunities for investment by super funds supporting national policy objectives if the Commonwealth Government could “create avenues for proving investment methodologies” and the Bill on government’s climate change provided a more consistent framework for decision-making across the economy.
Deepening of links
The document follows a recent visit to Indonesia by Financial Services Minister Stephen Jones and senior executives from the fund management and pension fund industry led by super investment vehicle chairman Greg Combet. $200 billion fund IFM Investors.
The investors represented in the delegation, which visited Indonesia and Singapore, came from AustralianSuper, Aware Super, Cbus, UniSuper, Macquarie Asset Management, the Future Fund and the Queensland Investment Corporation.
In an interview with ABC National Radio last week after the report was published, IFM Chairman Combet said Australia needed to “deepen economic engagement with Indonesia”.
Australian super funds had historically not seen countries like Indonesia as attractive places to invest, he said. Most offshore investments by IFM and other super funds were made in Europe and North America, where investors had confidence in the legal system and where there was more transparency around institutional and regulatory systems.
“In Indonesia, it was always seen as quite difficult,” he said, but “sometimes pension investors need a push from the government.”
Combet said he was asked to lead the delegation to Indonesia by Prime Minister Anthony Albanese, who visited Indonesia shortly after taking office.
The Indonesian government was keen to hear from Australian investors on ways to attract investment by Australian super funds to invest in toll roads and other critical infrastructure in the country. “Indonesia is one of the largest economies in the world. He is a very important neighbour. It is important for us politically, economically and from a security point of view.
“We need to deepen our engagement with Indonesia. This is what the Prime Minister expects us to think about. »
The super fund visit to Indonesia follows similar visits by super fund delegations overseas under the previous Labor government. Former superannuation minister Bill Shorten led delegations to Israel and Myanmar that were opening up at the time following the release of political leader Aung San Suu Kyi. However, Myanmar proved too politically risky for the funds to invest in, as political events worsened.
Lack of investment
The theme of super funds considering investment in Indonesia was echoed in a speech to ASFA members in Canberra last week by Minister Jones who noted the lack of investment in Indonesia by Australian super funds.
But he said funds from Canada, the Netherlands and the United Arab Emirates had invested there. “It’s clear that other countries are doing better than us in opening doors to investment,” he said.
He said the government should seek to ‘take a leadership role’ in working with super funds to explore investment opportunities in the region and that encouraging trade with the region was deliberately part of the strategy. government “for decades”.
He said the government had taken steps in the past to encourage trade and exports to new markets in the region for Australia’s resources, agriculture and universities. “Government has a critical role here in terms of our super funds as well,” he said.