By 2033 super funds in Australia will control more than half ASX

Super funds in Australia collectively hold $700 billion in ASX-listed Australian equities, with predictions indicating that super funds could control more than half of the ASX within 15 years.

Super funds currently hold almost 40% of the ASX with an increase of 6.7%p.a. over the past five years and 9.4%p.a. over the past decade. With this share growing roughly one percentage point per year, in 10 years it will be 50% and in 20 years ownership levels could be 60%. This growth is significantly faster than the growth of the market capitalisation of the ASX.

Research by Rainmaker Information has found that not for profit super funds (including industry funds) account for just under one half of superannuation’s total influence over the ASX, retail funds one quarter, and SMSFs the remaining 27%.

It is estimated that super funds hold more than 20% of the banking sector but if the proportion that SMSFs own are included; the combined ratio could be as high as one third within this sector.

“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,” Dunnin added.

Australia’s 20 most popular companies for super funds
4ANZ Bank
5BHP Billiton
8Macquarie Group
11Rio Tinto
13Origin Energy
Source: Rainmaker’s 2018 super fund portfolio holdings study

SMSFs, despite the large amount of money they have invested into ASX-listed companies, have only a weak voice among company boards because their share ownership is diluted across hundreds of thousands of separate super funds.

Super funds have $3 billion of new money to invest every week and about one third of that is likely to go towards investing in Australian companies.

“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.” said Dunnin.

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