Venture investment “not what super funds are built for”

With almost $4 trillion in Australian superannuation assets, that pool of capital is sometimes cited as an untapped resource for worthwhile but underfunded causes, such as developing high-tech local businesses.

Encouraging just a small portion of this to find its way into tech startups is a popular idea — one sometimes advocated by contributors to this website — and could potentially make a big difference. 

Head of the Tech Council of Australia, Damian Kassabgi, wrote in The Australian this week that government policy should encourage funds towards “long-term, high-performing sectors” including technology.

“Reforms that only measure short-term gains tend to deter investment into tech; however, the long-term nature of superannuation investment is particularly congruent with the ongoing capital and scale-up lead time needed to build successful tech companies,” Kassabgi wrote. 

The issue came up at Thursday’s inaugural Semiconductor Australia conference, which focussed on a high-growth industry, though one with low levels of local investor support. 

Australian Industry Group Chief Executive Innes Willox, on a panel with Kassabgi, gave a counterpoint.

“People look at super as if it’s a honey pot and an answer to all our problems. Yes it is growing, but there are a couple of things I just want to keep in mind here,” said Willox, who is also Deputy Chair and Director at AustralianSuper.

“If you don’t bring a project to us that returns guaranteed CPI plus 4 [per cent] don’t come. If you’re sort of under CPI plus 8 you’re going to struggle. You’ve got to do better than that… And there are hundreds and hundreds of proposals that come to us every day. We do things at scale.”

An example of at-scale for the organisation that manages $341 billion of retirement savings is this month’s $2.2 billion investment in US data centre company DataBank.

The “mum and dad’s money” under management includes an average pension fund that is “somewhere less than a hundred thousand dollars”, said Willox. 

The main concerns for super funds are scale and a long-term benefit. The main concern for customers is a return, and if they don’t get it they will simply go to another super fund.

“Super funds as a whole do not have a great track record of what you might call venture investment,” said Willox. 

“So that’s why we’d like to do it but we tend not to do it, because we’re not good at it. It’s not what super funds are built for, it’s not the way they’re structured or set up.”

Picture: credit Semiconductor Australia/Linkedin