Hostplus chair Peter Collins has called on the Federal Government to facilitate better communication between advisory bodies such as Infrastructure Australia and super funds to boost investment in local projects.
"We would naturally want to invest domestically first – we want to exhaust all those opportunities," Collins said at the sell-out the Australian Investment Council's 2019 Gala dinner.
"One of the problems we face is you've got bodies like Infrastructure Australia and Infrastructure NSW – all the States are doing infrastructure bodies – they don't necessarily talk, at all, to those with the funds for those infrastructure projects. Maybe it's up to a Federal Government to say, look, let's provide an annual interface where we sit down and we look at the list of projects: here's the amount of money – can we do a deal here?"
There is a growing need to build and replace critical infrastructure around the world and governments are increasingly looking to the private sector to help fund it. Organisations such as Infrastructure Australia and Infrastructure NSW provide independent advice to governments about the merits of proposed infrastructure projects and long-term strategic planning.
Hostplus currently allocates about 10 per cent of its $35 billion portfolio to infrastructure with IFM Investors, which it owns alongside 27 other funds, becoming a major global investor.
Federal Minister for Trade, Tourism and Investment, Simon Birmingham, also speaking at the gala event, said it was important to bring together private capital, the super industry and overseas investors.
"We recognise that Australian funds need to invest outside of Australia to spread their risk. We want to encourage global funds to invest here in Australia and to seize the opportunities and the potential investment that accrues."
Hostplus holds significant Australian investments such as the Port Botany and Port Kembla seaports but also counts infrastructure such as toll roads, water management, airports and natural gas in the United States, Mexico, United Kingdom, Austria, Turkey, Poland, New Zealand, and Germany.
Collins said that for every $4 US dollars invested in Australia, Australia invests $3 in the United States. Industry funds such as Hostplus had received a "massive inflow of funds" after the Royal Commission into financial services pinpointed endemic issues at some retail fund rivals – and that money now needed a home, he said.
"I can state on behalf of industry funds that we have a strong and declared preference for domestic investment where we can find good investable products. If there are better investable products with a better rate of return on offer internationally then we're actually legally obliged to look at that on behalf of our members."
Industry funds' continued growth is also likely to benefit Australia's private equity and venture capital sector. Illiquid assets have been a key driver behind the sector's long-term outperformance.
"We've reached a scale previously unimagined. We will never downscale… that's where the world is now. You should be talking to us and we should be talking to you to explore what we can do together."
Hostplus is one of the more aggressive funds, currently investing 8.5 per cent of its $35 billion portfolio in private equity and venture capital, well above its strategic asset allocation target of 7 per cent.
That decision proved a wise one as private equity proved to be the fund's best-performing asset class in 2018.
"We're up there with the asset allocation level with the American funds – we're probably leading the way in that sense. I think other funds will likely follow – that there will be more investment in private equity."
Hostplus has also become one of the country's leading supporters of venture capital in recent years, allocating about 12 per cent of its $2 billion-plus private equity allocation to the sector.