Australia pension funds seen growing on global stage

MELBOURNE, June 8 (Reuters) - Australia's A$1.2 trillion ($1.01 billion) pension fund industry, the world's fifth largest, will need to become more active in offshore markets as the industry grows ever larger, the head of a review of the system said.

Because the supply of Australian equities is limited, local funds will need to dramatically increase their expertise in investing in various offshore asset classes, the chairman of the review, Jeremy Cooper, said on Tuesday.

"As the money flows in and these vehicles get to the sort of numbers where a A$50 billion super fund (pension fund) is dead average, you really are a significant global investor," Cooper said after a speech to a Stockbrokers' Association conference.

"Now there is limited internal staffing and resources; the (funds) will need maybe several hundred experts on various asset classes," Cooper said.

The centre-left Labor government has commissioned a major report into the funds industry, which relies on mandatory employer contribution to workers' pension funds.

Contributions are now set at 9 percent of income and are due to rise to 12 percent.

Cooper said his review projects that the average size of an individual pension fund will grow from A$1.5 billion now to A$28 billion in 2035, in current dollars.

The overall industry size is expected to triple over that same time frame from A$1.1 trillion now to A$3.2 trillion in current dollars, as the funds management industry increases from 90 percent of GDP to 130 percent.

At that sort of size, "You simply can't have a purely domestic Australian outlook on anything. If you invest overseas, what do you invest in and so you seek to buy in that sort of global expertise," Cooper said.

The review, due to report by the end of June, is supposed to provide a more stable framework for retirement funds in the decades ahead, with the population expected to increase from 22 million to around 35 million by 2050.

Cooper's team is examining regulatory arrangements, industry structure, competition, fees and technology used by funds. (Reporting by Victoria Thieberger; Editing by Ed Davies)