New data has shown Chinese sovereign wealth and pension funds have halved their investment in ASX 200 companies in the last five years, while local superannuation funds have doubled their holdings.
Link Group-owned Orient Capital has published the findings, which showed investments from Chinese funds in the ASX 200 had a $2 billion decline in the last year alone.
Super funds’ investment in the top 200 has increased from less than $24 billion in 2014 to more than $54 billion.
Australian investors represented 70 per cent of issued capital in the ASX 200 in July, with institutional and retail investors accounting for 42 per cent and 28 per cent respectively.
Super funds taking investment management in-house amplified their influence
Orient Capital ANZ general manager Justin Ellis said the super industry trend towards internalisation of investment management is changing how ASX-listed companies and funds engage with each other.
“The most significant trend in the data is the shift towards super funds managing their strategies in-house, reflecting the investment that funds have made in building their own internal capabilities, and their desire to have greater control and visibility over how their capital is deployed,” Mr Ellis said.
“UniSuper exemplifies this approach, having increased their overall investment in the ASX 200 in each of the last five years, and over that time also internalising the management of more than three-quarters of that investment.
“The flow-on effect is that super funds have become a substantially more important and active presence on the registries of ASX 200 companies, and in turn are now at the forefront of pushing for transparent and best practice ESG performance. The feedback we have received is that most companies have recognised this trend and are improving how they communicate with funds, but that there remains room for improvement – particularly outside of the ASX 200.”
US, Norges flocked to ASX, but coal could kill inflows
Meanwhile US ownership of the ASX 200 has increased by 21 per cent during the period. North America represented the second-largest source of ownership in the ASX 200 at 14.5 per cent, after Australian investors at 70 per cent.
US index funds were said to account for 60 per cent of the American position, with Vanguard, State Street and BlackRock accounting for 90 per cent of the index funds involved.
Further, Norway’s Norges Bank and Japan’s Pension Investment Fund increased their investments by more than 70 per cent.
“The rapid decline in Chinese sovereign wealth and pension fund investment in the ASX 200 is significant, however it may suggest a strategic shift towards other asset classes locally, rather than a purposeful withdrawal of capital from the market entirely,” Mr Ellis said.
“In either case, the growth in investment from other overseas sovereign wealth and pension funds has made up the shortfall. Norges’ announcement earlier this year that it would divest and cease investment in major oil, gas and coal development countries could however have severe implications for the Australian market, given its increased presence in the ASX 200.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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