In its submission to the Financial System Inquiry, the RBA said while infrastructure assets suit the long-term investment horizons of super funds and are generally less correlated with other financial market assets, they also have inherent risks and can be expensive to manage.
“Infrastructure projects are inherently complex and superannuation funds often lack the expertise to make infrastructure investment decisions themselves,” the RBA said in its submission.
“While some funds have made the decision to build this capability in-house, most have traditionally had to pay external asset managers to manage the asset and advise them on the investment process.”
The RBA also said unlisted infrastructure assets are generally less transparent and accessible compared to exchange-traded assets.
“Consequently, information on infrastructure projects is not readily available and has to be sought out, valuations are often infrequent, and there can be considerable uncertainty associated with some infrastructure investments,” said the RBA.
The Bank also argued infrastructure assets with a high degree of illiquidity could inhibit a super fund’s ability to maintain the liquidity necessary for accommodating any adjustments beneficiaries make to their investment portfolios.
“This liquidity risk may increase over time as an increasing share of the population reaches preservation age and withdraws funds from the system,” said the RBA.
The RBA stressed the need for trustees to “manage their investments in the best interest of the membership”, given the role of superannuation is to build retirement savings for its members.
