19 April 2020
Scott Morrison may well get his wish if private equity, backed by industry superannuation fund money, does bid for Virgin Australia, but not the way the Prime Minister intended, which has once again politicised super.
For the super sector, that is the problem of being the creation of politicians that has meant being subject to their often hypocritical whims to suit the purpose of the day. A few weeks ago the government thought it was clever opening the way for people to withdraw money early from their superannuation.
Josh Frydenberg noted “it’s your money” so you can get access to it if you are caught in a financial mess because of the government-imposed shutdown.
When the industry funds said they could face losses of up to $50bn in cash withdrawals, the Minister for Superannuation, Jane Hume, saw it as another leg in the push to consolidate superannuation funds.
Hume argued that some funds like Hostplus and REST were too reliant on the hospitality and retail sectors and, like others, had a concentrated pool from which to raise funds because industry fund contributions were often tied to industry industrial relations awards.
Diversification, she said, should be the rule in membership and investment strategy.
Then Morrison came up with the bright idea that specialist industry superannuation funds had plenty of cash so someone like the TWU, with a heavy dose of Virgin Australia workers, should be diverting funds into the airline.
The three pronouncements from the relevant ministers underlines the political bias against industry funds, breathtaking hypocrisy and, more importantly, a dangerous ignorance about how funds manage their money.
By law, managers must invest for the long term to boost member returns and this fiduciary duty would by definition prevent a fund making a national interest investment because that would suit the prime minister of the day.
When the government opened the door to early withdrawal of funds last month it not only risked members losing up to $84,0000 in lifetime savings but risked the funds losing the ability to invest to support corporate Australia.
Somehow all of this was forgotten by Morrison.
That said, it would not surprise if an industry fund like AustralianSuper provided capital to support a private equity bid for Virgin.
AustralianSuper has a stated policy of owning bigger stakes in fewer companies, which is why it backed BGH’s successful bid for Navitas and unsuccessful bid for Healthscope.
AustralianSuper investment chief Mark Delaney is keen to use the fund’s equity investments to support Australian companies with long-term capital.
This would be most company boards’ dream come true.
It would help if Canberra maintained a more consistent approach to superannuation even amid these extraordinary times.