Freight Rail, Passenger Rail

SMSFs set sights on infrastructure

Australia’s peak body for Self-Managed Super Funds has asked the Turnbull Government to improve access to the infrastructure sector for SMSF investors.

In its pre-Budget submission to the Federal Treasury, the SMSF Association noted the growing $700 million SMSF sector is excluded, in many ways, from the infrastructure building sector.

“The SMSF Association recommends that the Government and the Treasury work with industry to review and explore opportunities for infrastructure projects to be funded by SMSF capital,” the association’s submission reads.

“The superannuation sector plays an important role in funding infrastructure investment in Australia, but the $701 billion SMSF sector is largely precluded from investing in and funding infrastructure.”

According to the Association, super funds had $78 billion invested in the infrastructure sector as at September 2017, with two types of super – industry funds and public sector funds – representing 83% of this investment.

The Association forecasts the SMSF sector to grow to roughly $2.8 trillion by 2035.

Infrastructure investments appeal to many SMSF investors as they provide a long-term, reliable return, the Association explained.

“Allowing SMSFs to invest in infrastructure projects will deliver retirement income benefits for SMSFs that are seeking stable, long-term income to fund income streams and manage longevity risks,” the Budget submission states.

“SMSF investors are also traditionally ‘sticky investors’ that undertake investments with long-term investment timeframes in mind,” the submission continues. “This makes SMSFs suitable for investing in infrastructure if the product is appropriately structured.”

The Association recommends the development of a unitised, liquid market for infrastructure investment to cater to SMSFs.

“Infrastructure investments act as an important investment class that offers a risk-return point between cash/fixed interest and equity investments.

“This is attractive as younger demographics enter the SMSF space and a need for longer term investments arises due to increased life expectancies amongst the population.”