It is not hard to see why Melbourne has become the engine room of Australia's renowned pension fund sector.
The Victorian capital is a substantial financial centre that directly employs more than 100,000 people and, indirectly, a further 150,000 people. The city is also home to two of Australia's four largest banks, the ANZ Banking Group and National Australia Bank. Both banks have AA- credit ratings and are among only a handful of international banks with the coveted ranking in the aftermath of the global financial crisis. There are also more than 70 licensed banks in Australia and many of these have offices in Melbourne.
This finance hub provides food for thought as governments around the world consider the success of the Australian pension fund industry – which boasts A$2.7 trillion of funds under management – and ways to ensure ageing populations in their countries have sufficient financial resources in retirement.
City's Assets in Demand
Numerous institutions also benefit from asset investment opportunities in Victoria, with the state a leader in developing its economic and social infrastructure through private investment.
Victoria is also a global leader in best-practice infrastructure procurements. For example, the A$3.5 billion Wonthaggi Desalination Project is one of the world's largest public-private partnership (PPP) projects since the global financial crisis.
The success of this project during a significant global liquidity crisis highlights the Victorian Government's outstanding track record of using the PPP model, with the state taking the major share of Australia's infrastructure projects accessible to the private sector. These types of transactions continue to attract significant international investment while offering value for money to taxpayers.
Industry Leaders on Call
Melbourne is home to Australia's sovereign wealth fund, known as the Future Fund, which currently manages A$140 billion. The city is also the Australian headquarters of a range of global banks and fund managers, including Franklin Templeton, JB Were, Legg Mason, Mercer, Morgan Stanley Investment Management, Northern Trust, Vanguard and many others.
Melbourne contributes significantly to the nation's high-growth industry pension fund segment, which has led the way in providing outstanding pension products. About 60 per cent of all Australian industry pension fund balances are managed in Melbourne, which is home to AustralianSuper, CareSuper, CBus, HostPlus and UniSuper. Leading corporate pension funds related to the communications industry – Telstra Super and Australia Post Super – are also based in Melbourne.
This is not surprising to Ian Silk, chief executive of AustralianSuper, who recalls that 20 years ago Melbourne moved to establish itself as a leading finance hub and pension fund management centre.
"Victoria was an early mover into public and private partnership (deals) and investing and selling of public assets," Silk says. "For AustralianSuper, this has meant that we've had the opportunity, from the very beginning, to have direct access (to) and knowledge of terrific investment opportunities."Other respected industry leaders, such as David Murray, the former chief executive officer of the Commonwealth Bank and chair of the Future Fund and chair of the recent Financial Services Inquiry (FSI), see Melbourne as a 'skills hub' in Australia for funds management due to the quality of Melbourne's universities and its research capability. This is one of the fundamental reasons Melbourne's investment funds management capability will continue to grow, while attracting the attention of international business leaders.