Every second, $634 flows to AusSuper. No wonder Origin deal looks dead

And while Australian capital markets have been dealing with the growing power of super funds for years, AustralianSuper’s opposition to the Origin deal is a reminder that the game has changed again.

Five years ago – perhaps even more recently than that – a private capital firm like Brookfield, a big company like Origin and the bankers, lawyers and advisers who work on such deals, would have expected AustralianSuper to roll over and support this takeover after a bit of wrangling.

But things have changed, and it’s not just that AustralianSuper’s assets under management have more than doubled to almost $300 billion. The fund is far more sophisticated in the way it manages members’ money under chief investment officer Mark Delaney.

Not that long ago, some in capital markets saw the super sector a bit like a cottage industry of comrades. But super funds’ in-house investment teams are much bigger and much more capable, and backed by far more developed systems and processes.

That sophistication – which some critics inside markets still say is more perceived than real – has a few important implications in the context of the Origin deal.

First, it means that a fund like AustralianSuper doesn’t need the masters of the universe in the private capital and investment banking sectors as it once did. Rightly or wrongly, its increased capability means it has the confidence to back its own experience and knowledge in infrastructure or energy against a giant of the investment world.

Second, there is a sense among super sector insiders that AustralianSuper is more sceptical about the outlook for returns from private capital than it was previously.

Yes, this is deeply ironic, given the way funds have loaded up on unlisted assets in the past decade. But the fact AustralianSuper didn’t and hasn’t rolled into Brookfield’s deal as a consortium partner would suggest that it has broader questions about the returns private capital providers generate for members versus the fees and risks involved, including liquidity.

This is not to say that AustralianSuper will not remain prominent and enthusiastic investors in private assets. But it is notable that some funds, including Australian Retirement Trust, have recently expressed concerns about the hollowing out of the Australian equity market as more and more companies (particularly larger infrastructure businesses) have moved from public markets and into private hands.

Again, this is ironic given super funds have typically played vital roles in these take-privates. But AustralianSuper, with $60 billion in Australian equities, needs a vibrant ASX with companies that can deliver growth. The fund is not specifically blocking the Origin deal to keep the company public, but it won’t be upset that this is a byproduct.

The final implication of the growing investment sophistication is the distinctly different view on value that super funds can bring to a deal like the Origin takeover.

Plenty of investors profess to take a long-term view, but the fact that the average member of AustralianSuper is likely to spend 45 years with the fund forces the fund to apply this lens. And again, the size of the fund and its sophistication has given AustralianSuper the confidence to make this mandate much clearer than it has before.

Its willingness to express its view on value in the case of Origin also speaks to the fact that the company is a crucial piece in the jigsaw puzzle of the Australian energy transition.

Whether it would be best for Origin to make that transition in the hands of Brookfield, backed by its giant energy transition fund, or as a public company, remains a central point of contention in this battle.

Brookfield has clearly convinced the Origin board, the Australian Competition and Consumer Commission and several green groups that it can move faster and more effectively than Origin will be able to if it remains an ASX-listed company.

But AustralianSuper remains steadfast in its view Origin can stay public and make this transition, supported by the fund’s capital.

What Brookfield and AustralianSuper inherently agree on is that the energy transition will allow Origin to generate fat returns over decades – and Chanticleer would note that whoever gets control of Origin, it will be the Australian community that will end up providing these returns through higher energy costs and billions in government spending.

Brookfield believes it is paying a fair and reasonable price for those future returns. But AustralianSuper is determined to stare down what it believes is a lowball offer that will rob its members of decades of opportunity.

Whether AustralianSuper is right in its assessment of Origin’s value and the potential returns to members is frankly unclear, and probably won’t be known for years.

But maybe it’s not the point: What matters is that we are entering a new era where the power and influence of big super funds, and the way they are prepared to wield this power, is changing.

There will be some who are uncomfortable with the ramifications of this. One obvious one is that big super funds can potentially exercise negative control over some actions of a company – that is, they can stop a company from doing things with a shareholding that is a long way below 51 per cent.

Super funds would say that is of great financial benefit to members, which is their overriding obligation, and some investors would say the capital allocation record of boards is not so great that they couldn’t use a long-term shareholder acting like a long-term shareholder.

But there will be directors who justifiably struggle with the idea that a super fund is second-guessing the way they create value for shareholders. Who says the way AustralianSuper, or any other shareholders, sees the world is right?

Is AustralianSuper’s assessment of value more important than any other investor? Could a super fund’s different view on non-financial matters – such as environmental, social and governance (ESG) strategy – have outsized influence on the way, and who runs, a publicly listed company?

These are all legitimate questions, and the answers deserve careful debate. But at the very least, AustralianSuper’s actions at Origin may prompt boards of companies where super funds own large stakes to rethink the way they engage with these funds.

Because whatever happens at Thursday’s vote, the genie isn’t going back in the bottle. AustralianSuper’s coffers have swelled by $253,678 since you started reading this article, and their power is only increasing.