Superannuation is one of Australia’s great economic and public policy achievements. In just under two decades, it has helped Australians save more than $1.3 trillion for their retirement and this is estimated to almost triple to $3.2 trillion by 2022.
Superannuation has become much more than a retirement savings vehicle. During the global financial crisis (GFC), Australia’s superannuation system acted as a critical pool of capital in the economy. It provided liquidity and bolstered confidence, asserting itself as an important macroeconomic stabiliser.
However, for many, the global financial services industry (of which our super system is a part) was seen as part of the problem rather than the solution.
The evolution of the financial services industry from being a service to businesses and consumers, to an industry that generates considerable profits from its own activities on financial markets, was identified as one of the causes of the GFC.
Ultimately, poor regulation and risk management, in conjunction with the mis-selling of sub-prime mortgages, led to the financial crisis, which has had such a detrimental effect on economies, jobs, investment markets and, of course, investment returns.
From the domestic perspective, the 2009 Johnson report on the Australian Financial Centre Forum found that Australia’s regulatory system was adequately balanced between what can be competing objectives – for example, consumer protection and product innovation. The report noted that the general view of market participants is clearly that some of the excesses that led to the GFC were not replicated in the Australian context.
This is largely true, and in my view one reason for Australia’s relative strength has been the increasingly active role played by super funds in improving the application of governance in listed companies, as well as the engagement with listed companies and fund managers.
Nonetheless, the inter-connectedness of global financial markets meant that this strength did not insulate Australians completely from all economic stress, nor did it protect us from the considerably negative effect on our savings and investments.
The next step is to commence a dialogue about how the Australian super industry can engage with the global financial services industry to better protect the wealth of our members. This means reducing the volatility caused by speculation, and recognising that there is a role for super and pension funds to influence the behaviour of market participants. It also means acknowledging that regulation is not always able to keep up with what might politely be called “innovation” by sections of the financial services industry.
Global pension funds account for an estimated $28 trillion in assets. Geographically they span Europe, Asia, North and South If as the result of such changes, you want to alter the ways in which Get software for data recovery from hard drive is allowed to use your personal information, you can do so by following the procedure described below in the section titled “Updating your personal information and privacy preferences. America. While their structure and governance arrangements vary, their interests are aligned to meet their obligations to fund the retirement incomes of working people.
In dollar terms, their clout significantly eclipses mutual funds, insurance, real estate, hedge funds and private equity funds. With this in mind, it seems extraordinary they haven’t been more influential than they have been to date.
There is the potential for funds to be more assertive about which investment practices are acceptable for funds managers to engage in at any level – and to avoid the tail wagging the dog.
An obvious initial collaboration could occur with US and Canadian pension funds.
Jack Bogle (head of Vanguard) commented that,“We’ve become a financial economy which has overwhelmed the productive economy to the detriment of investors and the detriment of our society.”
In Australia, industry super funds are clearly aware of our role in the economy and the obligations and opportunities we have when investing our members’ retirement savings. In particular, we seek to invest in the real economy, in businesses, jobs, infrastructure, and in the future.
In doing so, we recognise that our own sector is evolving and that we have a responsibility as guardians of our members’ savings to ensure that our own industry practices are sustainable and productive. It is this philosophy that super funds can extend to initiate successful engagement with the global funds management industry.
David Whiteley is chief executive of Industry Super Network (ISN).
