Super chief wants pension funds to lend to business when banks refuse.
First up this year, the Federal Government began instructing superannuation funds to become quasi financial advisers that would by 2020 offer members tailored pension products, also known as Comprehensive Income Products for Retirement (CIPRS).
Now, former union boss-turned-superannuation investment guru Garry Weaven is pushing for funds to also become lenders to businesses.
Mr Weaven, the chairman of IFM Investors, a funds management company owned by 28 industry funds, isn’t proposing competing with banks. Rather he is suggesting coming to the rescue of corporates who cannot get credit through the normal financial channels – a notion that Australia’s richest man, cardboard king Anthony Pratt, has been pushing for a while.
The Australian Financial Review reported that Mr Weaven “has pledged to help businesses borrow more from the $2.7 trillion superannuation pile, amid fears that the Hayne banking royal commission will force banks to restrict lending to business”.
“The money is there to be channelled and attracted,” he said. “The banks, in order to keep growing their residential book, are probably going to have to reduce the proportion that they lend to the corporate sector, and super funds can fill that gap.”
Wesfarmers, which will sell off supermarket giant Coles later this year, has been particularly vocal about the consequences for Australian businesses if regulation of bank lending is crimped.
“The risk is that if banks and financial institutions become so risk averse, they slow down the provision of credit to individuals and businesses,” Wesfarmers chief executive Rob Scott said. “It's a risk if the regulatory response is too heavy handed.”
Last year, Mr Pratt called for super funds to work with banks who found it too expensive to lend directly to companies. He said funds could tap banks’ credit assessment and lending nous to deploy their vast reserves.
That year, AustralianSuper and IFM agreed to lend $150 million to Mr Pratt's Visy cardboard company to refinance existing debt.
Mr Weaven estimated banks lent $95 billion a year to non-financial corporations in Australia.
“So it's a very big business. We're not competing with them, we don't threaten their customer base in terms of normal banking relationships, so we'd be a natural partner. I would have thought that would be good for Australian business.”
Would you be happy for your super savings to be lent to businesses that banks turned away? Is there any upside for super funds to become lenders?