3rd Sep 2018
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Rich lister gets pro-union backing for super fund loans
Author: Olga Galacho
super funds want to be lenders

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?

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    COMMENTS

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    3rd Sep 2018
    7:34pm
    Great idea. Will improve returns to members
    MICK
    4th Sep 2018
    8:54am
    You haven't been following the probe into banks lately?
    What it will lead to is mums and dads getter even lower returns on their superannuation than they now get with big business dipping into their money and then going broke.
    Business knows how to milk the pot. It will milk superannuation the way it milks every well intentioned handout it ever gets.
    maelcolium
    4th Sep 2018
    11:46am
    Yeah, increase returns along with risk. Duh!

    The empirical long term evidence demonstrates that low risk interest investments over the longer term are equivalent to high risk investments, so why bother? Super is a long term retirement tool. Remember the GFC wiped out 40% of retail fund values? Those investments are now back to where they were except for those poor bastards at the time on the cusp of retirement who either deferred retirement for a decade or retired as paupers.

    What is needed is for the RBA to require banks to increase their balance sheets with more corporate loans rather than raid the retirement savings of the populace. At the moment these bankster parasites are hogging the safe lending speculative process of retail mortgages, rather than utilising their public licence to assist overall economic growth. The Government could remove this public licence in a heartbeat if they had the balls to do so. A simple directive by the Government of the day is required but this neoliberal crowd won't go down that path as it will enrage their masters in the financial sector. Much easier to pick the low hanging fruit and to hell with the public well being.
    Rae
    4th Sep 2018
    2:11pm
    Be better off buying the whole corporation if it's viable and having all the profits returned to the fund. A Pension Fund that buys Coles would do alright or any of the Water assets for that matter. Lending at the current low rates won't produce enough to be viable.
    Anonymous
    4th Sep 2018
    5:18pm
    There's one massive hoard of money in super. Inevitable that everyone who DOESN'T have a right to it is keen to get their hands on it somehow! Do we seriously expect that it will be left alone for the people who have rightful entitlement to it?
    Anonymous
    4th Sep 2018
    6:36pm
    It's just another investment option for super funds. If they don't avail themselves of this option, then they are not doing their members justice
    Adrianus
    5th Sep 2018
    2:07pm
    Olbaid, I doubt that it will improve members' returns. Its a terrible idea.
    But guess what? It is possible that its already happening. The Industry funds may already be favouring the unions and mates ? People need to be trustees of their own money if they wish to avoid those with a "I'll use OPM to finance my next venture" attitude.
    Whistleblower
    4th Sep 2018
    9:48am
    Absolutely not. Superannuation funds do not have the expertise in providing finance of this nature. Evaluating and monitoring financial requests is complex and should be left to the specialists and even they regularly make bad decisions with the resultant bad debts.
    GeorgeM
    4th Sep 2018
    7:50pm
    Yes, a really bad idea - when the loan experts won't lend for these risky loans they should not be funded by our Super as if the company fails the super members will lose out. Super Funds are NOT loan experts and WILL make bad load decisions. So very clear to most people here - why is it not clear for the proponents of this idea, Super Funds & regulators?

    Also, APRA (maybe sleeping again?) needs to step in and control / stop such market manipulations, and ensure reasonable loan funding access is provided by Banks.
    Travellersjoy
    4th Sep 2018
    10:50am
    Charming!
    How stupid do these people think we are?

    Too risky for a bank to lend them money, but my super is up for grabs? Forget it!

    The Royal Commission has shown how the 'high heid uns' just see us as sheep for fleecing, and this is just another lurk in their perpetual efforts to get their hands on OUR money.

    That it should come from Pratt is one thing, but that a former union man should be pushing the idea is another thing altogether. Obviously some of them are quick learners once they start hanging out with the rich and powerful.

    Next the Mafia will be demanding a piece of the superannuation action, if they aren't already in there somewhere. They and the banks have a lot in common.
    Travellersjoy
    4th Sep 2018
    10:50am
    Charming!
    How stupid do these people think we are?

    Too risky for a bank to lend them money, but my super is up for grabs? Forget it!

    The Royal Commission has shown how the 'high heid uns' just see us as sheep for fleecing, and this is just another lurk in their perpetual efforts to get their hands on OUR money.

    That it should come from Pratt is one thing, but that a former union man should be pushing the idea is another thing altogether. Obviously some of them are quick learners once they start hanging out with the rich and powerful.

    Next the Mafia will be demanding a piece of the superannuation action, if they aren't already in there somewhere. They and the banks have a lot in common.
    Travellersjoy
    4th Sep 2018
    10:50am
    Charming!
    How stupid do these people think we are?

    Too risky for a bank to lend them money, but my super is up for grabs? Forget it!

    The Royal Commission has shown how the 'high heid uns' just see us as sheep for fleecing, and this is just another lurk in their perpetual efforts to get their hands on OUR money.

    That it should come from Pratt is one thing, but that a former union man should be pushing the idea is another thing altogether. Obviously some of them are quick learners once they start hanging out with the rich and powerful.

    Next the Mafia will be demanding a piece of the superannuation action, if they aren't already in there somewhere. They and the banks have a lot in common.
    Travellersjoy
    4th Sep 2018
    10:50am
    Charming!
    How stupid do these people think we are?

    Too risky for a bank to lend them money, but my super is up for grabs? Forget it!

    The Royal Commission has shown how the 'high heid uns' just see us as sheep for fleecing, and this is just another lurk in their perpetual efforts to get their hands on OUR money.

    That it should come from Pratt is one thing, but that a former union man should be pushing the idea is another thing altogether. Obviously some of them are quick learners once they start hanging out with the rich and powerful.

    Next the Mafia will be demanding a piece of the superannuation action, if they aren't already in there somewhere. They and the banks have a lot in common.
    Travellersjoy
    4th Sep 2018
    10:50am
    Charming!
    How stupid do these people think we are?

    Too risky for a bank to lend them money, but my super is up for grabs? Forget it!

    The Royal Commission has shown how the 'high heid uns' just see us as sheep for fleecing, and this is just another lurk in their perpetual efforts to get their hands on OUR money.

    That it should come from Pratt is one thing, but that a former union man should be pushing the idea is another thing altogether. Obviously some of them are quick learners once they start hanging out with the rich and powerful.

    Next the Mafia will be demanding a piece of the superannuation action, if they aren't already in there somewhere. They and the banks have a lot in common.
    Travellersjoy
    4th Sep 2018
    10:50am
    Charming!
    How stupid do these people think we are?

    Too risky for a bank to lend them money, but my super is up for grabs? Forget it!

    The Royal Commission has shown how the 'high heid uns' just see us as sheep for fleecing, and this is just another lurk in their perpetual efforts to get their hands on OUR money.

    That it should come from Pratt is one thing, but that a former union man should be pushing the idea is another thing altogether. Obviously some of them are quick learners once they start hanging out with the rich and powerful.

    Next the Mafia will be demanding a piece of the superannuation action, if they aren't already in there somewhere. They and the banks have a lot in common.
    Travellersjoy
    4th Sep 2018
    10:50am
    Charming!
    How stupid do these people think we are?

    Too risky for a bank to lend them money, but my super is up for grabs? Forget it!

    The Royal Commission has shown how the 'high heid uns' just see us as sheep for fleecing, and this is just another lurk in their perpetual efforts to get their hands on OUR money.

    That it should come from Pratt is one thing, but that a former union man should be pushing the idea is another thing altogether. Obviously some of them are quick learners once they start hanging out with the rich and powerful.

    Next the Mafia will be demanding a piece of the superannuation action, if they aren't already in there somewhere. They and the banks have a lot in common.
    Travellersjoy
    4th Sep 2018
    10:50am
    Charming!
    How stupid do these people think we are?

    Too risky for a bank to lend them money, but my super is up for grabs? Forget it!

    The Royal Commission has shown how the 'high heid uns' just see us as sheep for fleecing, and this is just another lurk in their perpetual efforts to get their hands on OUR money.

    That it should come from Pratt is one thing, but that a former union man should be pushing the idea is another thing altogether. Obviously some of them are quick learners once they start hanging out with the rich and powerful.

    Next the Mafia will be demanding a piece of the superannuation action, if they aren't already in there somewhere. They and the banks have a lot in common.
    Travellersjoy
    4th Sep 2018
    10:50am
    Charming!
    How stupid do these people think we are?

    Too risky for a bank to lend them money, but my super is up for grabs? Forget it!

    The Royal Commission has shown how the 'high heid uns' just see us as sheep for fleecing, and this is just another lurk in their perpetual efforts to get their hands on OUR money.

    That it should come from Pratt is one thing, but that a former union man should be pushing the idea is another thing altogether. Obviously some of them are quick learners once they start hanging out with the rich and powerful.

    Next the Mafia will be demanding a piece of the superannuation action, if they aren't already in there somewhere. They and the banks have a lot in common.
    Priscilla
    4th Sep 2018
    10:53am
    Definitely not!
    maelcolium
    4th Sep 2018
    11:52am
    Hang on a bit - Weavan is no longer associated with the unions or industry funds. He is now a player in the financial sector so why if God's name would we listen to anything he says? I wouldn't be listening to Pratt either - his father built the empire, not him.
    But here's an idea. Let the retail funds lend to the corporates and leave the industry funds alone. I might see pigs fly then??

    THat was tongue in cheek of course because the retail fund managers (ie Banks) are not going to take any risk at all as they find it much safer to provide retail mortagages/
    invisible sock
    4th Sep 2018
    12:26pm
    $2.7 trillion - can't you just see them salivating over getting their hands on some of this.
    They would have to create a new investment category for you to opt into.
    An option even more risky than betting on all these DELAYED START dog and horse races.
    You wouldn't see which why they went.
    They could teach even Bernie Madoff a thing or two.
    On the Ball
    4th Sep 2018
    12:42pm
    "Rather he is suggesting coming to the rescue of corporates who cannot get credit through the normal financial channels "

    Really? So WE stump the money for businesses that the banks wont touch? Even with their record of taking on risky investments?

    NOT WITH MY MONEY YOU DON'T!!!

    This cannot increase returns for superannuants. That is a con.
    floss
    4th Sep 2018
    12:47pm
    NO.What fool would say it will improve returns and is a great idea.Just look at the Royal Commission into banking there is your answer olbaid.
    SFR
    4th Sep 2018
    5:47pm
    Olbaid did lol
    Old Geezer
    5th Sep 2018
    11:14am
    Returns are so bad now they need a lift and this will increase returns.
    KSS
    4th Sep 2018
    1:15pm
    Let me get this straight. A bank refuses a loan on the grounds that the risk is too great i.e. they don't believe the borrower will be able to repay the loan for whatever reason. So the borrower goes to MY superfund and says I am a too big a risk for the banks so I want you to give me the money. And MY superfund says: "OK" no questions asked.

    When that organisations can't repay the loan - because their risk was too high in the first place - who loses out? It won't be Mr Weaven, Mr Scott or Mr Pratt now will it?
    Old Geezer
    5th Sep 2018
    11:16am
    Banks are refusing these loans not due to risk but because they are too small for them to bother with. Some of these companies accessing these loans are the best performing companies in the world.
    GrayComputing
    4th Sep 2018
    2:14pm
    It is time for all of us (that means you) to rant at our MPs and Senators daily to take action for human decency and a huge stress reduction for pensioners

    NO ASSET TEST FOR A PENSION EVER AGAIN!
    A pension is not welfare.

    Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules.

    Hiring more Centrelink staff will only increase taxpayer’s costs for processing the creeping insane red tape monster system politicians and well paid bureaucrats have created.

    Help scrap it now. Become a hero.

    Even poorer New Zealand has a NO ASSET pension so it is cheaper and user friendly.

    Why worry that few million$ earners get it too. That is peanuts to them, not enough for a good vintage champagne.

    Do retired and retiring people really look forward and want 100++ visits to/from Centrelink and be part of 3 million waiting queues and lost calls?

    Does your MP really like being part of the system that allows this indirect abuse of the elderly?

    This abuse is actually sponsored by our government and forced down to Centrelink and borders on a criminal act.

    Why do MPs normally compassionate persons let this Centrelink abuse happen at taxpayers’ expense?

    Some opposition and independent MPs stand to lose their chance at being part of the needed government changes

    We all (that means you) need to tell our MP and senators every day that these criminal asset tests for a pension must be dropped now.

    DEMAND: NO ASSET TEST FOR A PENSION EVER AGAIN!

    Please help yourself and others today and every day, pass this demand on to all government, opposition and independent MPs and senators who could help us to get a fair deal on pensions
    Old Geezer
    5th Sep 2018
    11:16am
    Please stay on the topic.

    4th Sep 2018
    2:31pm
    If corporations want to borrow from super funds at an appropriate price, the super fund would be stupid not to enter into such an arrangement for the benefit of its members

    Any fund refusing tol do so should have its Board tossed out. But it wont happen as the unions have their grubby hands all over industry funds
    SFR
    4th Sep 2018
    5:52pm
    So what you are saying is that only the industry funds should enter into these arrangements, so why not the retail funds. Wouldn't it be easier for the banks to knock back a loan application but then recommend they go to the office next door which is their super arm.
    Anonymous
    4th Sep 2018
    6:35pm
    Not saying that at all. Are you nuts ?

    I'm saying all super should do it but industry funds wont because of the corrupt union officials in charge
    Rae
    5th Sep 2018
    8:40am
    My Industry Fund owns all sorts of utilities and portions of companies. It also has a proportion invested in bonds already. Any company can issue a bond prospectus for a fund to consider. This whole article is a beat up. One of the funds most lucrative holdings are water utilities in major cities.

    If the company is profitable then funds do purchase the bonds anyway and always have. At current low interest rates while shares rise on tax cut buy backs it would be foolish to be buying debt now anyway. Interest rates are rising and current bond purchases may be loss makers in the future.The coupons are low.

    A very big fund would be justified to invest in start ups that show promise with a small portion of funds but that would be quite risky and need to be priced accordingly and have specialised advisors. There is very little of that happening which explains the movement of our brightest young entrepreneurs to America or Europe.

    Our biggest problem is a very small population and a lack of real effort towards savings and investment by many as it's all a bit too hard and complicated. Try explaining bonds at a BBQ and watch the eyes glaze over.

    Union officials are not in charge and I think you'll find they all hold bonds in the portfolio so your comment is quite incorrect.
    Old Man
    4th Sep 2018
    2:44pm
    I see this as a good idea but, most certainly, subject to sufficient security to support the advances as well as the ability to repay on time. Security would also need a joint and several guarantee by all of the directors of the company supported by real estate or cash. Should the company go under, there will always be someone left to carry the can. If the directors won't guarantee their own company then nobody should make finance available.

    As for corporates being unable to access credit through the normal commercial channels, we have seen banks cave in to the green movement who don't want any funds made available to "polluters". A refusal to lend doesn't always mean that there is a risk. If repayment is guaranteed and the interest and fees generate a good return commensurate with the investment market, I can see a win/win.
    Anonymous
    4th Sep 2018
    2:48pm
    The only sensible post on this topic so far.
    All the other negative nellie posts motivated by ignorance and blind support for left wing politics
    Rae
    5th Sep 2018
    8:47am
    I don't think it's the fear of the Green protesters but the fear of court action to claim compensation down the track. You can't keep destroying rivers and pumping pollution everywhere these days. The Internet has the genie out of the bottle. Banks caved in on Adani because the promoters were found to be very shady characters and a loan to them was hugely risky. Try getting your money back in Indian courts.

    How much will it cost taxpayers for the air force contamination of Newcastle and Katherine do you suppose and was it worth it?

    Directors will never take on the risk. It's exactly why you incorporate and achieve limited liability. Businesses changing that arrangement would be foolish indeed.
    AutumnOz
    4th Sep 2018
    4:13pm
    I thought super funds were supposed to keep members money safe and make it grow into a good retirement income.
    Using it as set out above is tantamount to putting it through the poker machines at the local casino.....or chucking it out with the garbage.
    Anonymous
    4th Sep 2018
    4:36pm
    I spose your super is all invested in cash and not in any shares or whatsoever.
    Chooky
    4th Sep 2018
    8:03pm
    What happens if large loans go bad? No, I don’t think so. Not with my super, thank you.
    Anonymous
    4th Sep 2018
    8:05pm
    What happens when your super is invested in shares in a company that goes bust ?
    Seenitall
    4th Sep 2018
    11:48pm
    Quite agree with you Chooky, this is Dracula in charge of the blood bank. The large corporates who have governments by the short and curlies, pay bugger all tax and have absolutely no social conscience would soon work out ways to sequester the money and manipulate it in such convoluted and devious ways that it effectively would never have to be paid back. As you say, not with my super.
    Rae
    5th Sep 2018
    11:52am
    There are apparently a lot of Collateral Loan Obligations where the risk is unknown once again. We know what happened last time.

    OF course the holders would like to off load it onto pension funds as happened in the UK, Greece, the US and even here in 2008. We'd be crazy to go there until after the crash and the rebalancing of interest rates and share prices. Those companies can't keep borrowing and buying their own shares forever. Something has to give.
    Franky
    5th Sep 2018
    6:25am
    If the banks find lower risk in lending for real estate, why should super funds take on the higher risk business lending and put retirees future funding at risk? Not a good idea..
    Old Geezer
    5th Sep 2018
    11:19am
    Lending for real estate at present is certainly not low risk especially if real estate falls 50%.
    Rae
    5th Sep 2018
    11:56am
    Welcome back OG. Did you enjoy Alaska?

    I also wonder about all those apartments coming on sale and how many have been built with dubious cladding. The FIN last weekend had a great article. Seems everyone is lumbering the cost onto the owners and even the court cases cost heaps. You'd have to be crazy to buy housing or much else at current prices.

    Lending pension funds money for real estate into a falling market seems designed to lose capital.
    Adrianus
    5th Sep 2018
    11:38am
    This is a stupid idea.
    We have a perfectly good banking system. Why destroy that? Then compete with banks, firstly by picking up the low quality lending then competing for the better quality loans? Which certainly will follow as night follows day because the doubtful and delinquents will need to be offset by some quality loans. It just doesn't make any sense. The idea has only short term merit and attached is long term pain. Why weaken the prudential investment regulations of superannuation to appease a handful of movers and shakers who cant convince a bank to back them?
    There are better ways to encourage business bank lending and one sure way is sound government policy which facilitates economic prosperity.
    Rae
    5th Sep 2018
    11:58am
    We could sure do with some sound government policy facilitating economic prosperity. It's not looking so rosy right now is it?
    GrayComputing
    5th Sep 2018
    2:35pm
    WHAT A SCAM.. Get ready to loose your super big time (for some losing it again and again)
    TinTin
    7th Sep 2018
    8:40pm
    So AustralianSuper has agreed to lend Australian business's the publics savings, did AS have any sort of public referendum to get an approval? I doubt it. I will suggest to my wife she should take her money out of AS and put it in another fund. If cardboard king Anthony Pratt has been pushing this for a while then it's not in the publics favour. Remember Pratt is a member of the IPA and if you're not familiar with the IPA agenda then you seriously ought to be.
    Jimmigrant
    8th Sep 2018
    11:05am
    Jeez Tin Tin, what did the Institute of Public Accountants ever do to you ..........


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