Australia’s superannuation funds are at risk of being spooked into cutting their investment in tech, according to opposition digital economy spokesman Ed Husic, who describes the contribution as “vital”.
Mr Husic, who in parliament has called on the Future Fund to focus more on early-stage technology, said venture capital levels in Australia had hit new highs due in part to superannuation funds.
“This surge in support we’ve seen in the past few years for Australian venture capital has come from Australian super, and that’s allowed others to start considering whether they should be joining the push,” Mr Husic told The Australian.
“I worry this ideological obsession the government has against industry funds will potentially spook them out of continuing that support.”
According to Mr Husic, the view that existed a few years ago, that a lack of capital was a problem for start-ups, has eased off, largely from increased flow of capital including from super funds.
“If we see that support dry up, then I think the big concern is whether we go back to square one,” he said. “Industry super funds will just go back to the old, what was considered bread and butter for them, instead of looking long term and recognising investment in the VC space delivers for the economy, but also for super fund members with higher returns.
“We just can’t afford to go back to the old days and old ways.”
Super funds have ramped up their support for early-stage venture capital in recent years, with First State Super and Hostplus for example tipping funding into Blackbird Ventures’ third fund.
Blackbird Ventures co-founder Niki Scevak told The Australian he was heartened by the growing population of institutional investors in Australia interested in venture capital, and his relationship with super funds was very positive.
“Seven of the world’s largest companies are tech companies. You just can’t really ignore tech any more,” he said.
“Inevitably there will be a time when an Australian tech company will be the largest Australian company overall. It’s becoming harder and harder to hide from technology; you look at people like Warren Buffett, who proudly proclaimed he’d never go near tech. Apple is now his largest holding and he said his biggest regret was never investing in Amazon.
“I don’t detect any reason why there’d become less interested in technology.”
Square Peg Capital co-founder Paul Bassat agreed, and said the tech funding landscape had come a long way in just a couple of years.
“We’re seeing a fair bit more interest from the super funds in VC now. There’s a recognition we’re producing world-class venture capital funds in Australia,” Mr Bassat told The Australian.
“And secondly to have a portfolio today that doesn’t have exposure to disruptive businesses and a fairly uncorrelated asset class is a very risky strategy. Super funds are recognising that much more now than two or three years ago.
“The trend is definitely still towards super funds embracing or at least closely examining the technology industry.”
Future Fund chief executive David Neal told a Senate estimates committee last month that investment in venture capital would improve.
“These are very small amounts of money in a very large portfolio, and so if the opportunities are good enough, there’s plenty of opportunity for us to continue to contribute more capital. So there’s certainly no cap or limit or anything like that,” Mr Neal said.
“From a Future Fund portfolio perspective, it would not be possible for us to have too much Australian venture capital in a $160 billion portfolio.”