Australian superannuation doubles down as Chinese funds halve investment

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November 25 2019
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Chinese sovereign wealth and pension funds have halved their investment in the ASX 200 in the last five years as local superannuation funds have doubled their stake in Australia’s blue chips, new research has found.

New research from Orient Capital showed that China’s sovereign wealth and pension funds have decreased considerably over the last five years, from $25.8 billion in 2014 to $11.1 billion in 2019. This marks a fall of almost $2 billion in the last 12 months alone.

Orient Capital ANZ general manager Justin Ellis said China’s move might be part of a reallocation strategy domestically.

“The rapid decline in Chinese sovereign wealth and pension fund investment in the ASX 200 is significant. However, it may suggest a strategic shift towards other asset classes locally rather than a purposeful withdrawal of capital from the market entirely,” Mr Ellis said.

This is in comparison with Australian superannuation funds, which have increased their stake in the ASX 200 from less than $24 billion in 2014 to more than $54 billion today.

Mr Ellis said the trend towards internalisation is changing how ASX listed companies and super funds engage with each other.

“The most significant trend in the data is the shift towards super funds managing their own investment strategies in-house, reflecting the investment that funds have made in building their own internal capabilities, and their desire to have greater control and visibility over how their capital is deployed,” he said.

China sells; US, Japan and Norway buy

Australian investors accounted for approximately 70 per cent of issued capital in the ASX 200 in July 2019, with institutional and retail investors accounting for 42 and 28 per cent, respectively.

North America represents the second-largest source of ownership in the ASX 200, increasing its shares from 12 per cent in 2014 to 14.5 per cent in 2019.

Almost all of these gains have come through US-based index funds, which now account for more than 60 per cent of US investment in the ASX 200, and of which more than 90 per cent is managed by three firms – Vanguard, BlackRock and State Street Global Advisors.

“There is a misconception among some boards and executives that the passive investment approach of index investors translates to a passive approach to ESG. In our experience, this is certainly not the case,” Mr Ellis said.

Elsewhere, Norway’s Norges Bank and the Government Pension Investment Fund of Japan (GPIF), the two largest sovereign wealth funds in the world, have greatly increased their direct investment in the ASX 200 over the last five years.

Norges and GPIF have increased their investments in the ASX 200 by 71 and 73 per cent over the last five years to $20.7 billion and $11.4 billion, respectively, the research concluded.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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