AustralianSuper plans A$5bn overseas spending spree

AustralianSuper is set to embark on a A$5bn ($3.7bn) international spending spree and increase its presence in London as the giant pension fund scours the market for investment opportunities.

The A$230bn fund, whose 2.3m members account for more than 1 in 10 of the Australian workforce, plans to increase the number of staff in its London office from 38 to 90 by the end of 2023, as it hunts for deals in infrastructure and private debt. 

The move follows the opening last month of an AustralianSuper New York office, a key plank in its plans to deploy A$5bn on overseas deals in the next 12 months.

“They are going to be very substantial offices, it’s not just three or four people,” Mark Delaney, chief investment officer, told the Financial Times in an interview. “And then it’ll get even bigger beyond 2024-25.”

AustralianSuper employs about 170 investment professionals domestically and overseas.

The fund’s ambitions to build its offshore staff to more than 200 in the next few years come as other supersized global pension plans look to increase investment in private markets to escape the effect of low interest rates on members’ returns.

Illiquid assets, such as property, infrastructure and private equity, have the potential to deliver higher and more regular returns for retirement schemes than traditional liquid pension fund assets, such as listed equities and bonds. 

Earlier this month, the Ontario Teachers’ Pension Plan, one of the world’s largest retirement schemes, announced plans for a C$70bn ($55bn) push into international private markets, spanning assets from infrastructure to real estate.

“With a decent overseas presence you can trust them (staff) to identify and evaluate and do all the hard yards on the deals,” said Delaney, whose Australian-based staff have been subjected to strict travel restrictions as part of the country’s Covid-19 quarantine policies. “The Australians don’t have to fly backwards and forwards the whole time.”

AustralianSuper has more than A$100bn invested across the Australian economy ranging from blue-chip companies to ports and property developments and is the biggest single active investor in the Australian stock market. 

But Delaney said the fund was eyeing a further international expansion as deals were looking “attractive” offshore, particularly in infrastructure and private debt.

“We like infrastructure. We’ve liked infrastructure for a long time,” said Delaney. “There’s lots of opportunities globally in infrastructure; it’s competitive, but there are lots of opportunities because every country’s got infrastructure. ”

On private debt, Delaney said AustralianSuper would look to do deals “around areas in which we have experience”.

“The spreads have come in a lot, so probably we won’t be piling in as much money as what we were two or three years ago because cash rates are low and spreads are low.”

Timo Schmid, managing director and partner with Melbourne-based Boston Consulting Group, said it was important for pension funds to have “boots on the ground” in targeted geographies.

“You require critical mass in terms of investment professionals to nurture deal leads and develop relationships across sectors over 24-36 months before you actually see transactions happening,” he said. “Canadian pension funds have shown that material in-market presence overseas is the best way to get into the local deal flow.”

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