Why Superannuation is Different

There is a significant body of academic research that focuses on finance and investment. Superannuation and pension funds are often seen as a subset of the pool of capital that makes up global investment markets.

While investment markets are necessarily made up of investors with a range of different objectives, superannuation and pension investors have a long-term focus, which can be different from other investors. In the Australian context our superannuation system has been established for a specific purpose; to provide Australians with income in retirement to supplement the Government Age Pension.

According to the Organisation for Economic Cooperation and Development (OECD), the global pool of pension assets is USD 19.3 trillion. In Australia, our superannuation pool is around AUD 1.3 trillion. One of the challenges that superannuation and pension investors have is that the investment environment in which funds operate does not necessarily reflect the interests of long-term investors. In recent years pension funds have begun to work collaboratively on a global level to ensure their long-term interests are reflected in investment decision making. A good example of this work is the establishment of the United Nations Principles for Responsible Investment which aim to integrate environmental, social and governance (ESG) factors in investment decision making on the basis that these factors can have long-term impacts on the ability of pension funds to generate long-term sustainable investment returns.

The reason that superannuation has a different focus is because super funds have responsibilities both as an asset owner and as a fiduciary.