Australian industry super funds are likely to channel at least AUD130bn (€83.1bn) into infrastructure by 2025, according to an industry executive.
Kristian Fok, chief investment officer with Cbus, one of Australia’s larger funds, said, on average, 5% of the portfolios of Australian superannuation funds are committed to infrastructure - including both equity and debt investment.
Fok, who was addressing the Masters Builders Australia National Leaders Summit, said: “If superannuation in Australia doubles by 2025, even at current proportions, this would equate to AUD130bn flowing from superannuation into infrastructure, either in Australia or overseas.”
And if the industry increases its infrastructure weighting to that reflecting Cbus, which has a 10% allocation to the sector, Fok said the figure would be AUD260bn.
But even what he described as “this massive amount of capital” would not keep up with demand for finance for infrastructure, which has been estimated at between AUD455m and AUD770bn in Australia over the next decade.
Fok noted that the Australian government alone has announced capital spending of AUD75bn over the next decade.
“With the growth of funds under management, many super funds are now building internal teams and expertise that means greenfield projects are a real consideration,” he said.
For Cbus, with its development experience and track record through Cbus Property, directly investing in infrastructure was a logical next step.
Superannuation funds would have a greater appetite to participate across the lifetime of a project as developer, financier, direct owner and operator - or to get involved in discrete parts of the project.
Super funds were well-positioned to be debt providers to infrastructure, with an increased appetite for patient, longer-term project financing and investments extending beyond traditional asset class boundaries, he said.
He said Australian superannuation funds would play an increasing role in facilitating partnerships between local and international participants.
A recent example was Cbus investing alongside the Dutch Infrastructure Fund (DIF) in Bright Energy.
Together, Cbus and DIF hold an 80.1% equity interest in a portfolio of wind and solar renewable generation assets in Western Australia.
Fok said infrastructure investment was contributing to the fund’s strong performance.
“Our growth option’s investment objective is to return 3.25% above inflation over rolling 10-year periods 75% of the time,” he said.
“This objective has been met.”