Listed companies and superannuation funds can lift returns and boost Australia’s economic growth if they work together, the recent 2019 Association of Superannuation Funds of Australia heard.

With their deep pools of money and patient capital, superannuation funds are “a public company’s dream”, speakers told the conference in Melbourne.

Australian superannuation funds have close to A$3 trillion of funds under management, while the ASX has about A$1.9 trillion of invested capital and has consistently produced returns of about 10% a year. “If you pull those together, that is a pretty good fit,” the audience heard.

In a panel session titled The role of superannuation funds as shareholders featuring opinions from the super sector and from the listed company space, the audience heard how superfunds can forge an effective and mutually-beneficial relationship with ASX-listed companies, in particular because of their long-term outlook.

Superannuation funds have an important role to play in supporting companies to take well-analysed and appropriate risk in order to pursue growth.

However, long-term outcomes are often overlooked by investors. Boards and managers of listed companies are rewarded for short-term successes and penalised for short-term failures, without a view of what they might mean for the long-term future of the company.

“There’s too many incentives for boards of listed companies not to take risk at the moment,” a corporate leader said.

Superfunds and listed companies should also look at different asset types and consider which ownership structure might suit each one. For instance, an oil company will have infrastructure assets and exploration and production assets and each of these will have different risk profiles.

Listed companies need to outline long-term objectives

Commenting on the relationship between super funds and listed companies, one panel member said: “I think we’ve all got really significant responsibilities to play our roles, to be open with each other, to question and challenge but to accept there will be successes and failures.”

Equally, public companies need to spend more time communicating their long-term objectives with funds. For instance, companies which emit CO2 should set out a roadmap of their emissions for the coming years and seek the funds’ support. “In other words, please don’t come back to us in five years’ time and say ‘we can’t invest in you any longer because the goalposts have moved’,” a corporate leader said. “We’ve got to take a long-term view together.”

As major shareholders, superfunds should support public companies when they are unfairly targeted by activist shareholders at their annual meetings, which is occurring with increasing frequency. “Your role in this is to say ‘we might support the political message, but we don’t support you using companies for this’,” the audience heard.

By working together, superannuation funds and listed companies can help grow the economy.

“Australia is a great place to do business. We’ve got a very clear legal system. We’ve had 28 years of uninterrupted economic growth. We’ve got rich natural resources and rich human resources. We’re on the doorstep of the growth economies of the world,” the audience heard.

“Between us, between the business sector and the superannuation sector I think we can get a lot done in the years ahead.”