In a submission to the Financial System Inquiry (FSI), the Self Managed Super Fund (SMSF) Professionals’ Association of Australia (SPAA) has urged the five-member panel to look at ways the growing SMSF capital pool can be unlocked to help fund productive Australian investment that benefits the real economy.
In particular, SPAA pointed to investment in Australian infrastructure and loans to corporate Australia as two key avenues where this sentiment of harnessing the SMSF savings pool could best be realised.
SPAA’s submission to the FSI noted that the superannuation industry currently held $1.8 trillion in retirement savings, with SMSFs accounting for around a third of that figure.
It went on to state that over the next 20 years, the SMSF sector’s asset holdings would grow to exceed $2 trillion, making it a source of capital funding too large to ignore in considering Australia’s future.
Commenting on the submission, Jordan George, senior manager, technical and policy for SPAA, said that the industry body was of the belief that the SMSF sector should be viewed as an important source of capital for future Australian investment, both public and private.
“Opening up direct infrastructure investment to SMSFs could assist SMSFs in managing longevity risks, while also funding Australia’s future investment needs,” he said.
“Infrastructure investments act as an important investment class that offers a risk-return point between cash/fixed-interest and equity investments.
“SMSFs are currently limited in investing in infrastructure due to high dollar threshold and the illiquid nature of the investment,” George continued.
“(However,) unitising investment in infrastructure projects to smaller investments, say for example $25,000, and developing secondary markets could overcome current barriers to investment by SMSFs in the sector.”
According too George, a deeper and more accessible corporate bond market would also allow SMSFs to diversify their low risk holdings and allow Australian corporates to reduce dependence on overseas debt funding.
Originally published by SMSF Essentials.
