Superannuation funds should consider investing in venture capital in order to achieve higher returns and contribute to the economic recovery.
According to Stoic Venture Capital, super funds had a competitive advantage over short-term equity markets as they had a long-term time horizon. This compared to equity markets where venture capital was often penalised for their preference for changes over a long timeline.
They also both had narrow focuses on specific sectors such as energy which were held by both industry super funds and venture capital funds.
Stoic partner, Dr Geoff Waring, said: “Investing together could make these two complementary organisations the driving force behind Australia’s growing start-ups and contribute significantly to the recovery of the economy
“What many super funds don’t understand is that the highest-performing venture capital funds typically far outdo the high performers in other asset classes including the better stock market and property fund managers.”
“The longer-term nature of super funds’ liabilities and investment strategies means they don’t mind the short-term illiquidity of venture capital and have the patience required to capture the high returns of new technology from research and development.”
He added venture capital could be classified as an impact investment as many start-ups were focused on solving dilemmas in the environment or health. This could then be an attractive option for super funds who were seeking to include more of these impact or sustainable options in their allocations.