THE $2.3 trillion Australian superannuation industry’s apparent extreme lack of interest in investing in agriculture is to be the focus of a parliamentary inquiry.
The House of Representatives Standing Committee on Agriculture and Water Resources has launched an inquiry into the barriers to increased investment by superannuation funds.
It is calling for submissions from the superannuation industry, agribusiness and the wider farm sector on what hurdles currently restrict capital investment in farmland, agriculture infrastructure and farm sector investment businesses, and where Canberra might be able to assist.
Committee chairman and WA Liberal Member for O’Connor, Rick Wilson, fears the farm sector is in danger of being left behind because of a lack of investment momentum.
“The agricultural sector in Australia needs much more investment if it wants to remain competitive and the superannuation industry is an obvious source,” Mr Wilson said.
“Only about 0.2 per cent of the $2t-plus in assets managed by Australian superannuation funds are in agriculture – an extraordinary situation.
“It’s quite an anomaly to have overseas sovereign wealth funds and private equity groups keen to invest in agriculture here, but our own superannuation industry seems reluctant, despite having so much money to manage.”
The Australian superannuation system is one of the world’s biggest pension schemes.
Last financial year alone the value of assets under management by the local industry grew 10pc to top $2.3t, making some of our funds among the world’s biggest superannuation businesses.
Mr Wilson hoped his committee, which wants initial submissions by Friday, June 22, could find out how more investment in agriculture may be “encouraged”.
It will be looking into regulatory requirements imposed on superannuation funds by the Australian Securities and Investment Commission, the Australian Prudential Regulation Authority, or other relevant regulators which may act as a barrier to superannuation fund interest.
The committee will also consider if information required by superannuation funds in order to invest in Australian agriculture is readily available, and what extra statistical performance reporting is necessary.
Other practical barriers to investment or potential incentives will also be explored.
Mr Wilson did not want to pre-empt the inquiry’s findings but he was curious to explore if, for example, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) could better tailor its forecast and analytical research reporting to meet information demands of investment industry analysts and investors.
He questioned if there were areas where government rulings or industry regulations were dampening investment activity.
“As a farmer myself, I’d love to see more capital injected into the industry,” Mr Wilson said.
“We are a very capital-intensive industry, but we’re also very much capital-constrained in the farming community – and we’re getting older.
“Next generation farmers need to access to capital to grow their businesses, or lease, or manage properties which might be owned by outside investors.”
The topic of superannuation fund investment appetite for Australian agriculture has attracted considerable discussion at industry issues forums in recent years, particularly at the recent Beef Australia 2018 at Rockhampton, Queensland.
When quizzed on his thoughts Rural Funds Management managing director, David Bryant, told a Beef Australia 2018 panel session that Australian pension industry “accumulation” funds were less enthusiastic to commit to long-term farm sector investments.
“Australian funds must, by law, have money immediately available when a superannuate retires or opts to move pension funds, taking the lot in one hit,” Mr Bryant said.
“That compares with the situation in North America where the Harvard Endowment Fund, or the Canadian pension groups we currently see active in Australia, don’t have the unpredictability of the liquidity requirement to which our industry is bound.
“They operate on defined benefit outcomes which they can work out over 20 or 30 years.
“It’s the big difference.
“They don’t need so much week to week liquidity built into their investment strategies.” Agribusiness head with property marketer CBRE, Danny Thomas, noted the fluid nature of Australian super fund investment and the predictability of returns from real estate and infrastructure assets made that class more attractive to investment managers.
“They’re 20 or 40 years ahead of us in ag because they’ve got long track records with investors and familiarity on their side,” Mr Thomas said.
