Super funds could own half the ASX in 10 years’ time

Superannuation funds could own more than half the ASX in 10 years, according to Rainmaker Information.

Super funds currently own around 39% of the ASX, or around $700 billion in shares. Rainmaker finds that this has been growing roughly by one percentage point a year, estimating that super funds could hold 50% in 10 years and reach 60% in 20 years.

“This growth is significantly faster than the growth of the market capitalisation of the ASX,” says Rainmaker.

Not-for-profit super funds – which include but isn’t exclusively industry funds – hold an increasing proportion of the ASX shares owned by super funds, while holdings by retail funds are declining. Rainmaker found that not-for-profit super funds hold 48% of the Australian shares held by super funds, with 27% held by SMSFs and 24% held by retail funds*.

The appears to be a clear downward trend for the holdings of retail funds, down from 34% in 2008. There may also be a downward trend for SMSFs, though it isn’t as pronounced as for retail funds.

Meanwhile, not-for-profit funds have been increasing their holdings in Australian shares. In 2008 it was 37%, and in 2013 it was 40%.

“Super funds becoming dominant shareholders means the impacted companies will have to get used to having larger, more interested investors” said Alex Dunnin, executive director of research at Rainmaker.

“While this may challenge some companies that are not used to dealing with larger, active investors, the upside is that this new dynamic will lower the cost of capital for these companies and will actually help them expand their growth opportunities.”

“The next frontier is how do we get super funds to invest in smaller companies? That is, how do we create channels to enable super funds to invest into start-ups as well as small businesses and how do we create channels for them to invest into businesses that may not be listed on the ASX, such as those in the agriculture sector.”

SMSFs have significant holdings in ASX-listed companies, but have a “weak voice” when it comes to corporate boards due to holdings being spread over hundreds of thousands of funds, Rainmaker said.

*There may be some rounding of these figures, or another category not included.

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