ASFA calls for ASX diversification
If the Australian Securities Exchange (ASX) continues to concentrate around mining and resources, it could ultimately hurt the allocation to Aussie equities by superannuation funds.
This is according to the Association of Superannuation Funds of Australia (ASFA) director advocacy and policy strategy, Gordon Noble, who spoke at the AusBiotech 2012 Conference about ways in which the superannuation industry could invest in the struggling venture capital fund sector.
Noble said the structure of the ASX was of material interest to super funds, pointing to research showing that 95 per cent of super fund investment in Australian equities was in ASX 200 companies.
This is a direct result of the legislative and regulatory environment, Noble said.
"The result of our legislative and regulatory environment is that Australia's superannuation assets are predominantly invested in liquid assets," Noble said.
"The ability for superannuation funds to invest in illiquid markets, even if listed, will be constrained due to the issues I have described in terms of our regulatory environment."
While some parts of the ASX are highly liquid, the same cannot be said for the bottom half of the market, Noble said.
ASFA's focus is, therefore, on increasing liquidity and diversification, which could ultimately benefit the biotech industry, he added.
"It is in the interest of the superannuation industry to encourage the diversification of the ASX; a diversified ASX provides superannuation funds with a broad range of investment opportunities that funds can invest in according to their different risk and return objectives," Noble said.
"By contrast, if the ASX continues to concentrate around mining and resources company stocks, then this is ultimately likely to impact on the allocation by superannuation funds to Australian equities."
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