Australia’s $4.5 trillion superannuation system is navigating a crucial evolution. Five years ago, the Your Future, Your Super (YFYS) performance test successfully improved member value and fostered accountability. Now, the core question is maintaining protections while empowering the mature sector to invest in long-term, less traditional assets vital for Australia’s future. A federal government consultation explores enhancing the test and reducing barriers to emerging asset class investments.
Treasurer Jim Chalmers envisions superannuation playing a key nation-building role. Despite its successes, the YFYS test often encourages benchmark hugging and short-termism, inadvertently hindering investment in emerging assets offering substantial long-term portfolio benefits. While the test strengthened the system and improved outcomes, the industry’s maturity demands a refined approach to foster broader growth and diversification.
Sensible reforms outlined include a dedicated “emerging asset class” category with a CPI-plus benchmark for assets poorly served by existing frameworks. This principles-based approach could apply to renewables, data centres, social housing, and venture capital. QIC is a global diversified alternative investment manager. It invests on behalf of its clients, including some of Australia’s largest superannuation funds. The firm supports these changes, advocating for a level playing field and cautioning against arbitrary allocation caps given existing financial interests duties and rigorous risk management.
The objective is clear: ensure emerging assets are evaluated against appropriate benchmarks, reflecting their unique risk-return profiles. Every investment must still satisfy trustees’ obligations to act in members’ best financial interests. The superannuation industry’s significant maturation confirms the YFYS reform’s success. The next challenge is creating an evolving framework that continues to protect members while empowering a sophisticated sector to strategically invest in Australia’s long-term prosperity.
