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PE drives superfund outperformance

Australia’s superannuation funds have performed better than the country's retail funds, largely owing to investments in alternative assets.

Industry superannuation funds in Australia outperformed retail superannuation funds consistently over a ten-year period, according to recent figures released by the country’s Industry Super Network. 

Over the 12 months to 31 July 2013, industry funds returned 17.17 percent compared to retail funds at 16.70 percent.

However, the gap increased over a ten-year period, with superannuation funds returning 7.25 percent during that time, compared to the 5.42 percent returned by retail funds. 

Superannuation funds in Australia are private equity’s biggest domestic source of capital. David Whiteley, chief executive of Industry Super Network, told Private Equity International that its exposure to the asset class “certainly was a factor in our outperformance.” 

“Private equity has outperformed both international and domestic listed equities by between 50-100 basis points over the long term,” he explained.

Investments in infrastructure have been a key driver of results, according to the statement. 

Private equity comprises around 10% of our unlisted assets which have generated investment outperformance of 118bps per annum on average compared to retail master trusts which are more heavily exposed to listed investments.

David Whiteley, chief executive, Industry Super Network

“Private equity comprises around 10 percent of our unlisted assets which have generated investment outperformance of 118bps per annum on average compared to retail master trusts which are more heavily exposed to listed investments.”

However, some Australian superannuation funds have pulled back from investing in private equity due to increasing compliance requirements. 

This has also caused a number of funds to consolidate, which could benefit private equity, Paul Schroder, general manager of investments at AustralianSuper, told PEI earlier. 

“One definite thing that comes from consolidation is much more deeply resourced investment teams and a stronger capability and inclination to manage assets within an organisation, so the more likely it is they would consider private equity in their allocations,” Schroder explained. 

However, recent quarterly results have showed listed equities in Australia to outperform private equity, according to data from Cambridge Associates and the Australian Private Equity and Venture Capital Association (AVCAL).

The S&P/ASX 300 Index showed returns of 8.06 for the first quarter of 2013 while the C/A index, which measures Australia’s private equity and venture capital performance, showed annualised net-of-fees returns of 2.36 percent. Australian public equity results beat private equity over one quarter, one year and 10-year horizons, according to AVCAL, although private equity outperformed in three, five and 15-year horizons.