Double handling costing infrastructure returns

The infrastructure industry needs to minimise waste through costs from intermediaries in projects and investment, with procurement costs coming at a cost to the returns for investors such as superannuation funds, according to Cbus chief investment officer Kristian Fok.

In a speech given to the Master Builders Australia National Leaders Summit at Parliament House in Canberra yesterday, Fok would said the infrastructure industry faced the challenge of double handling and having more entities involved in single transactions as it grew.

“We have seen the growth of financiers who are employing consultants who are employing other financiers who are employing consultants who are employing actuaries with sometimes multiple carriers on the same transaction,” Fok said.

This in turn impacts not just investors’ returns but also impacts negatively on unsuccessful bidders. He also noted the impact it had on Government spending on infrastructure.

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Considering the volume of superannuation investment in infrastructure, the sector could do well to heed Fok’s message. He said that the “remarkable cash flows” in Australia’s superannuation industry are both driving and responding to innovation in Australian infrastructure delivery.

On average, five per cent of Australian super funds’ portfolios are committed to infrastructure, either through debt or equity investment. Should they allocate 10 per cent, this would translate to $260 billion flowing from super into infrastructure by 2025.

Fok also said that Cbus was looking at its own supply chain and how many “clips of the ticket” were being taken out of members’ savings along the way.