SMC highlights long-term benefits of investing in private markets

Super Members Council (SMC) has submitted a paper in response to the Australian Securities and Investments Commission's (ASIC) discussion paper, outlining how superannuation investments in the private sector can drive long-term financial system stability and prosperity for Australians.

SMC believes the nation's stable and sophisticated super system has strongly reduced the financial system instability, while delivering strong retirement savings.

In the paper, SMC compared three asset classes: Australian listed equity, international listed equity, and private equity (internal rate of return), and found the performance of each returned 8.3%, 12.1%, and 14.7%, respectively, in the five years to 30 September 2024.

"Over the long-term, funds with more illiquid investments such as unlisted infrastructure have experienced higher risk-adjusted returns, which suggests they have captured a return premium for investing in these assets," the paper read.

"To continue to deliver such strong investment returns..., it is imperative that the system settings continue to support scale and its long investment horizon, which are safeguarded by the policy principles of preservation, universality and compulsion."

One of the key benefits of unlisted assets for super funds is that they diversify a portfolio and provide a more stable net return when they are included, especially in the current volatile climate.

SMC said while ASIC's discussion paper focuses on risks, it overlooks the many strong benefits of private markets, and its submission aims to demonstrate the clear benefits of these investments.

SMC contends the superannuation system's growth is a strength, not a risk, supporting the economy by channeling savings into investments, it added.

"Australia's $2 trillion pool of super savings in profit-to-member super funds has not only improved the lives of working people but also generated national prosperity," SMC executive general manager strategy and insights Matt Linden said.

"In the first three years of the APRA performance tests, profit-to-member super funds added almost $18.5 billion to members' savings above market benchmarks and outperformed global peers."

Conversely, the Australian Securities Exchange (ASX) has recently highlighted opportunities in the IPO market, in a move to spike "global competitiveness".