Key Takeaways
- • Moody's has assigned AustralianSuper an AAA long-term issuer rating, making it the first superannuation fund to receive the rating and the first non-government-owned pension fund globally to do so.
- • AustralianSuper joins four other Australian entities holding a Moody's AAA long-term rating; Moody's rates 102 entities AAA globally.
- • The fund is the first Asia-Pacific entity to receive the rating since Singapore's Temasek in 2004.
- • Moody's cited AustralianSuper's dominant franchise, the 12 per cent super guarantee inflows, conservative financial policies and absence of defined-benefit obligations as rating drivers.
- • Moody's flagged rising competition from investment platforms and self-managed super funds, and a need to improve member advice access and retirement products.
Summary
AustralianSuper has become the first superannuation fund to be assigned an AAA long-term issuer rating by Moody's, according to the agency's announcement reported by Investment Magazine. The fund joins four other Australian entities carrying a Moody's AAA long-term rating, a group the agency assigns to 102 entities globally. It is also the first Asia-Pacific entity since Singapore's Temasek in 2004 to receive the rating.
Chief executive Paul Schroder said in a statement that the rating should make a meaningful difference in reducing the cost of investments and transactions, particularly as the fund grows its global investment footprint. He noted that AustralianSuper uses derivatives and other financial instruments to manage risk and ensure market access in all conditions. Schroder described the fund as the first non-government-owned pension fund globally to receive an AAA long-term issuer rating from Moody's, adding that the rating reflects well on Australia's superannuation system. The fund is also understood to be a direct lender to private enterprise in Europe as part of its private credit activities in its mid-risk portfolio.
Moody's attributed the rating to AustralianSuper's "dominant franchise as Australia's largest superannuation fund," the structural benefits of the mandatory, defined-contribution superannuation system, its very conservative financial policies, a large and highly diversified portfolio, and a member demographic that cannot be easily replicated. The agency said the 12 per cent super guarantee produces a large, steady and predictable stream of inflows relatively independent of investment performance, and that the fund carries no defined-benefit funding obligations.
On liquidity, Moody's said risk from member switching or withdrawals is mitigated by persistently positive net flows, a high share of marketable securities and the fund's liquidity management framework. The agency referenced the more than $5 billion paid to members under the 2020 COVID-19 early release scheme, with 97 per cent of payments made within five days.
Moody's also cautioned that AustralianSuper is "not immune from rising industry-wide competitive challenges" from investment platforms and self-managed super funds. It pointed to a growing need for the fund to improve access to advice and evolve its retirement products for an ageing membership.
Chief executive Paul Schroder said in a statement that the rating should make a meaningful difference in reducing the cost of investments and transactions, particularly as the fund grows its global investment footprint. He noted that AustralianSuper uses derivatives and other financial instruments to manage risk and ensure market access in all conditions. Schroder described the fund as the first non-government-owned pension fund globally to receive an AAA long-term issuer rating from Moody's, adding that the rating reflects well on Australia's superannuation system. The fund is also understood to be a direct lender to private enterprise in Europe as part of its private credit activities in its mid-risk portfolio.
Moody's attributed the rating to AustralianSuper's "dominant franchise as Australia's largest superannuation fund," the structural benefits of the mandatory, defined-contribution superannuation system, its very conservative financial policies, a large and highly diversified portfolio, and a member demographic that cannot be easily replicated. The agency said the 12 per cent super guarantee produces a large, steady and predictable stream of inflows relatively independent of investment performance, and that the fund carries no defined-benefit funding obligations.
On liquidity, Moody's said risk from member switching or withdrawals is mitigated by persistently positive net flows, a high share of marketable securities and the fund's liquidity management framework. The agency referenced the more than $5 billion paid to members under the 2020 COVID-19 early release scheme, with 97 per cent of payments made within five days.
Moody's also cautioned that AustralianSuper is "not immune from rising industry-wide competitive challenges" from investment platforms and self-managed super funds. It pointed to a growing need for the fund to improve access to advice and evolve its retirement products for an ageing membership.
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