Imagine if you had more than a trillion dollars to spend on creating jobs, backing new products, preventing and treating disease, building better cities with cheaper housing and fantastic roads and public transport and solving the world’s environmental problems.
You do. It is called superannuation and as of September 30, 2011, we had collectively contributed $1.2 trillion to our various super funds.
Unfortunately for you, me, our nation and the world, that money is not working to alleviate the many problems we face, nor to create new opportunities. It’s a disgrace. Why can’t we put our super to work for our society collectively? That way we will also gain individually.
Take the example of the $73 billion Future Fund, which has a mandate to invest in three “nation-building” funds. Have a look at its long-term asset investment allocation for 2010-11: 40 per cent is in equities, of which 32.5 per cent is in companies listed on global sharemarkets. Listed companies have easy access to capital and often shed jobs, rather than create them. They don’t need the FF.
The fund allocates 7.5 per cent to private equity, including venture capital, the finance devoted to backing new companies that create jobs and products.
Super is a long term-investment – just like venture capital and private equity – yet venture capital fund managers are struggling to access superannuation. As a society, we lose in two ways.
The total value of the Future Fund declined by $2 billion in the past 12 months. The superannuation sector lost $47 billion in the three months between June 30 and September 30, 2011.
I spoke recently to a gent who runs a charity called Community Housing. He can offer investors a yield of 5 per cent to 6 per cent on their money, with a potential 3 per cent capital gain a year. He invests the money in building new dwellings and refurbishing old ones, increasing the amount of affordable housing available to workers who earn less than about $50,000. That’s about 40 per cent of workers. These are not drug addicts (who also deserve housing); they are nurses, baristas, shop assistants and artists: the people who power our urban lives.
HESTA is a super fund for health workers. The five-year return on its Balanced Fund was an annual 3.2 per cent. If HESTA invested in an affordable housing project, it would deliver a respectable return and affordable housing to its members. Time for a rethink.