A plan to enable super funds to throw their financial weight behind small businesses has received a cautious welcome from the industry.
On Tuesday, the Coalition pledged $100 million to kick-start a new Australian Business Growth Fund, enabling super funds and banks to combine their financial resources to be invested in businesses with annual turnovers between $2 million and $50 million.
The plan was first flagged in December, and will be based on similar schemes already operating in the UK and Canada.
“The government has been working closely with a number of banks and other financial institutions to establish the fund and is confident, if it is re-elected, that the fund will gain the private sector support needed to bring it life,” Prime Minister Scott Morrison said in a joint statement.
However, the announcement received a lukewarm response from Australia’s $2.7 trillion superannuation sector.
Industry Super Australia chief executive Bernie Dean told The New Daily that super funds will “need to look closely” at the detail of the proposal and what it will mean for members’ returns.
“Given everything we do is driven by members’ best interests, our funds would need to have confidence that the investment decisions being made through this new fund wouldn’t leave members vulnerable to low net returns,” he said.
The Association of Superannuation Funds of Australia (ASFA) took a similar stance, with the organisation’s deputy CEO and chief policy officer Glen McCrea saying that funds are constantly on the lookout for “new investment opportunities, provided they are in the best interests of members.”
“If the proposed vehicle is designed in such a way as to reduce risks for investors in the proposed fund, such as being backed by a government guarantee and having staff with the appropriate expertise and experience, this would be a positive,” Mr McCrea said.
“However ultimately funds make final investment decisions based on key factors, such as expected returns and overall risk.”
Meanwhile, Australia’s peak body for bank-owned superannuation funds, the Financial Services Council (FSC), threw its support behind the fund.
“The FSC supports new opportunities for super funds to diversify, invest in Australian small business, and provide good returns for people saving for retirement,” a spokesperson said.
“We therefore welcome the proposed Australian Business Growth Fund. We imagine super funds will look closely at this new investment opportunity.”
Plan addresses ‘critical funding gap’
Australian Small Business and Family Enterprise Ombudsman Kate Carnell supported the proposal, which she said will address a shortage of “long-term, patient capital” for up-and-coming small businesses.
“Importantly, the fund will be managed by private sector expertise and will benefit [small businesses] with annual turnovers between $2 million to $50 million,” she said.
Ms Carnell said the model also differed from current private equity funding arrangements sometimes used by small businesses, and the proposed arrangement would “enable these businesses to retain control of their company”.
“Similar models in the UK and Canada are tried and tested; addressing barriers to accessing affordable capital for businesses that have gone on to demonstrate successful growth,” she said.
The New Daily is owned by Industry Super Holdings