BALANCING ACT

In just 15 years, the number of Australians aged over 75 will have skyrocketed to 3.7 million. Ast more of the population enters retirement, how will super funds manage their increased liabilities while still acting in all members' best financial interests? .

- Eliza Bavin

Australians are living longer, and the population is ageing as the cost of living puts the brakes on many young Australians' plans of having a family, big or small. So, while the $4.2 trillion superannuation industry has benefitted from having such a significant proportion of the population in phase, in just a few decades things may change drastically.

Of course, super funds are aware this change is coming and, while it may be gradual, it doesn't change the fact that the nature of how super funds operate will have to change, too.

Finbourne Technology chief executive Thomas McHughⓇ1 says Australia's superannuation system is a sort of "leading light" when it comes to how a pension system can be set up, but it needs to be adaptable.

"The fact that [super funds] exist for the benefit of members and that they very much live by that as a result means their incentives are very aligned to being forward thinking and looking," McHugh says.

"Everything they look at is in terms of efficiency. How to reduce costs so members get better returns, how to look at what is happening in the world to trade off risk versus returns. But there are several issues that loom large."

One of these issues, McHugh says, is that there is almost too much capital, and funds have basically reached the limit of how much they can invest within Australia, which means they must look elsewhere.

"They're looking at the world and wondering where they can get those returns, and they're investing in alternative assets, private equity, direct lending and a whole raft of other things," he says.