Will Super Funds Lend Aussie Businesses a Helping Hand?

How can we make it easier for Aussie businesses to thrive without relying on banks?

This is what three billionaires — Anthony Pratt, Lindsay Fox and Gina Rinehart — sat down to discuss. They considered replicating the US system — loans facilitated by insurance companies and other long-term investors.

That means super funds, starved of yield, would offer Aussie businesses long-term maturity loans.

A Game-Changer?

Fox, the billionaire founder of transport group Linfox, said 20-year debt funding outside the banking system would be a game-changer for his company:

The scope for our business has never been better, and to have somebody who wants to come in and give us 20-year finance — that would change the ballgame completely.

Rinehart agreed. Her Roy Hill mine in WA only became a reality after a gruelling process of equity investments and bank financing. With long-term financing outside the banking industry, Rinehart’s Roy Hill project would have been that much easier to start.

However, such activities could create liquidity problems for super funds. As The Australian Financial Review explains:

David Neal, CEO of the Future Fund, says every super fund has what he calls an “illiquid budget” or a limited amount of money that can be invested in illiquid assets.

In recent years the highest returning illiquid assets have been infrastructure, real estate and private equity. He says it is hard for loans to compete with that because the returns are too low.

While no decisions have been made yet, you can be sure the discussions will continue.


Härje Ronngard,

Junior Analyst, Markets & Money

PS: Aussie property prices continue to defy gravity. Those who have tried to predict the top have been wrong thus far. That’s because property prices still have a long runway of growth ahead.

If you want to read more about a long-term booming property market, check out our special Markets & Money report, ‘Why Australian Property Is On The Verge Of A Decade Long Boom’, by clicking here.

Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.

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