Private markets and direct investing remain appealing for AustralianSuper heading into the new year, as it embraces the paradox that an economic slowdown could actually create investment opportunities.
It was named Australia’s largest asset owner last year, usurping the Future Fund as it rose from US$169 billion to US$176 billion, according to The Asset Owner 100 by the Thinking Ahead Institute.
The super fund has acknowledged its size as a significant advantage for members, allowing it to pivot to deals at an early stage.
“AustralianSuper has been successfully internalising its investments for many years in a range of asset classes and will continue to do so, particularly globally and in private markets,” the fund’s head of asset allocation Alistair Barker told Super Review.
“This means the focus for the investment team is to do more private market investing and more direct investing, with the aim of accessing deals early and at lower cost.”
He said its London and recently opened New York offices will continue to support this, with the international teams now covering the full spectrum of investment capabilities including infrastructure, property, private credit, fixed income, capital markets, private equity, and international equities.
“We’re keen to continue to exploit our ability to do these sorts of deals and be flexible in capital allocation so we can target the best opportunities, this is [the] significant advantage for members that comes from our size and approach,” he stated.
Last year, it announced a raft of senior hires to bolster its overseas operations, including a new head of international equities Mark Hargraves based in London.
At the time, it flagged international operations as a key priority, with chief investment officer Damian Moloney describing the London office as an “important investment engine”.
This month, it announced the official opening of its New York office with a launch event that included the mayor of New York City, Eric Adams; AustralianSuper chair Dr Don Russell; and Australia’s consul-general to New York Heather Ridout.
AustralianSuper is forecast to grow to over $500 billion over the next five years and has signalled it will deploy almost 70 per cent of its growing inflows into global markets. It has some $40 billion invested in the UK and Europe and close to $85 billion currently invested in the US.
Lessons from 2023
The super fund flagged a renewed national focus on the retirement system as a “major priority” for the country’s super funds heading into the new year.
At the tail end of 2023, Treasury had announced a second consultation into retirement and how the superannuation system can provide security and income for Australians in retirement.
The consultation focused on supporting members to navigate the retirement system, delivering better retirement income products and services, and making lifetime income products more accessible, following the Retirement Income Covenant in 2022.
“Australia’s superannuation system is one of the best savings systems in the world, but with nearly 1.2 million Australians expected to transition to retirement in the next decade, we need to make it the best spending system as well,” Barker observed.
“Members need to have the confidence to spend the savings they have spent a lifetime building and super funds need to address the simple questions that most people approaching retirement have: can I afford to retire, and how can I have the best retirement possible?”
It has particularly been the case given current cost pressures, he said.
“As a result, we are focused both on providing quality guidance and support to help members plan and navigate their retirement needs, and making sure we provide a suite of quality, high-performing retirement products and services,” Barker said.
The executive told Super Review that the fund continues to monitor the impact of interest rates and geopolitical issues heading into 2024.
“On the economy, the full effect of the rises in interest rates over the last few years is yet to be felt and will likely come in the next year or two. The ability of central banks to ease policy at the right point in time is a key focus of financial markets. Policymakers need to strike a balance between not easing policy too early and failing to control inflation, and easing too late and hurting economic growth,” Barker explained.
While the fund would continue to take a medium to longer-term view on how to invest members’ savings, it also opined that somewhat paradoxically, any risk event or slowdown in the economy could create investment opportunities.
“We are well placed to pursue opportunities that arise across listed shares, private equity, credit and real assets such as infrastructure and property,” Barker said.
