Aware Super has reiterated its focus on unlisted assets as an area of opportunity as it shares its investment outlook for the year ahead.
The fund delivered double-digit returns for the 2023 calendar year, with its High Growth option delivering 12.3 per cent over the 12 months to 31 December 2023 and 8.4 per cent per annum on average over 10 years.
This is the fund’s MySuper option for members aged 55 and under – where most members are invested.
Similarly, the fund’s Retirement Income Conservative Balanced option, where most pension members are invested, delivered 8.7 per cent in the calendar year 2023 and 6.5 per cent per annum over 10 years.
“There were some positive surprises for the economy last year with labour markets showing remarkable resilience in the face of rising interest rates, while inflation trended lower after initially proving stubborn,” said Michael Winchester, Aware Super’s head of investment strategy.
“We believe central banks have broadly completed their tightening cycles, so interest rates are now likely to be steady for a time before starting to retreat.”
The fund is not expecting a deep recession in 2024, he said, rather a slowdown in economic growth from the lagged effects of higher interest rates.
“While inflationary pressure has eased, the period of low interest rates and inflation is over for now and we’ll need to see how different sectors in the economy adjust to this new regime,” Winchester added.
Looking at its portfolio for the new year, he outlined it was positioned to reflect significant trends that will drive long-term returns for its members, including growth in the digital economy, decarbonisation, and changing demographics.
“Within listed equities, the energy transition, artificial intelligence and ageing demographics are among the key themes that we expect will create opportunities for active management to add further value,” Winchester shared.
“We’re overweight the healthcare sector and underweight energy as it stands, which is reflective of where our active managers are finding some bottom-up opportunities.”
Additionally, the fund expects to continue modestly lifting its exposure to unlisted assets this year and indeed over the next few years, with a focus on infrastructure, property, private equity, and credit.
Aware Super currently holds multiple private equity allocations including climate agritech company Rumin8, telehealth platform Halodoc, technology venture capital fund Blackbird Ventures, and healthcare fund Global Health Opportunities Capital.
Winchester observed: “In recent years we’ve been gradually increasing our exposure to these sectors, focusing on assets we believe are well placed to outperform longer term. We see more opportunity still in these sectors.”
These investment initiatives will be supported by its London office, which opened mid-2023, and focuses on direct investment in real estate, infrastructure, and private equity, with an emphasis on the energy transition sector, affordable housing, innovation, life sciences, technology, and the digital infrastructure sector.
The fund expects to grow to 30–40 staff at the London office within the next few years as it eyes a target of some $250 billion in assets under management by 2025–26.
Aware has also announced a significant $10 billion commitment to its UK headquarters, building on its growth trajectory as a global institutional investor.
Speaking to Super Review in August, Aware Super CIO Damien Webb said: “We’ve gradually increased our exposure to unlisted assets over the past 10 years or so as we’ve grown into one of Australia’s biggest industry super funds, actively targeting the sectors we believe are best placed to outperform in the longer term.”
For 2024, the $160 billion fund reiterated that it views these assets as part of a successfully diversified portfolio, in line with much like its peers.
“We and other large super funds have long moved on from the simple 60:40 construct of equities and bonds, and embraced alternative assets that are much more resilient to higher-inflation scenarios and play an important role in delivering strong long-term returns for our members,” Winchester observed.
