Finance Your Super Super funds halve innovation investment

Super funds halve innovation investment

Super cuts innovation.
Super funds have cut venture capital investments. Photo: Getty
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Despite talk from Prime Minister Malcolm Turnbull about the importance of innovation in creating new jobs and industries, super fund allocations to venture capital have halved in the last six years.

Right Click Capital partner, Benjamin Chong, said super fund allocation to venture capital was at its lowest last year at 0.43 per cent, and this number had been halved since 2009, Super Review has reported.

“As Australia moves from being a land based economy whether it is agriculture or minerals to a services, innovation, and knowledge economy it is critical that we back people and companies that are going to have a greatest chance of success there,” Mr Chong said.

“Economic success is a cycle and part of the broader economic cycle and it is important for super funds that they think about that next generation of meeting retirement income that they seriously consider having an allocation.

“I’m not talking about government support or mandates, that’s problematic I’m talking about being a real positive business reason, long-term return reason for funds to get involved in venture capital.”

 Mr Chong noted that super funds were concerned that they did not have enough expertise in the area and were not sure if it would have a meaningful impact on their assets.

“I do wonder if there needs to be some glide path to a higher level of allocation,” he said.

“I’m not suggesting straight away to double, triple, or quadruple allocation, but if we have a look at long-term averages. Over the 10 years to December 2015, Australian private equity and venture funds outperformed Australian shares by 10 per cent and  small cap shares by 9 per cent.

Mr Chong noted that First State Super had announced they were going to allocated $200 million into venture capital, and Hostplus were also interested in the asset class.

The Turnbull plan

In December 2015 Prime Minister Malcolm Turnbull unveiled his much-anticipated innovation statement, saying he wanted to drive a so-called “ideas boom” to boost investment and economic growth.

The government's innovation plan could draw more money from super funds. Photo: AAP
The government’s innovation plan could draw more money from super funds. Photo: AAP

A key focus of the plan revolves around strengthening ties between the business community, universities and scientific institutions.

A $200 million innovation fund will co-invest in businesses that develop technology from the CSIRO and Australian universities, the ABC reported at the time.

Money has also been set aside to help students in years 5 and 7 learn coding.

Early stage investors in start-up businesses will get a 20 per cent non-refundable tax offset and a capital gains tax exemption.

Those investing in new early stage venture capital partnerships will get a 10 per cent offset.


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