Australia’s biggest pension fund to pay £23bn to UK and Europe

Australia’s biggest pension scheme plans to invest £23bn in the UK and Europe over the next five years as it joins other global mega funds pushing private markets further to yields.

AustralianSuper, which manages A$244 billion (£128 billion) on behalf of 2.5 million members, plans to more than double its assets in the UK from the current £7 billion to more than £15bn by 2026. The pension fund manager plans to increase its investments in Europe. from £12.6bn to £28bn over the same period, Damian Moloney, AustralianSuper’s chief investment officer, International, told the Financial Times.

The planned purchases would keep the weighting of UK and European assets stable relative to the fund’s total. But with its global assets expected to grow to more than A$570 billion by 2026, AustralianSuper says the cash available to spend overseas will increase significantly. The fund’s rapid growth is fueled by factors unique to the Australian market, where mandatory pension or retirement contributions made by employers are increasing and memberships are increasing, due to merger activity between savings scheme providers .

More than half of the fund is already invested overseas, including in big UK assets like Heathrow Airport and the King’s Cross redevelopment project in London, but Moloney sees more international opportunities in the markets private.

“There are strong opportunities in real estate, infrastructure and direct private credit in Europe and the UK,” Moloney said.

“We are looking at a variety of high quality mixed-use sustainable real estate investment opportunities that are or can be carbon neutral. (There are also) many infrastructure opportunities in the UK and Europe, driven by a need for asset renewal and new build, such as digital infrastructure.

The fund was also considering a “wide range” of private credit opportunities, in which non-bank financial companies provide loans for real estate and infrastructure projects, he said.

Moloney said the UK was an “obvious choice” to deploy more cash, especially as the fund was a long-term investor.

“Our experience to date in the UK has been very positive, with investments in assets such as Heathrow, Peel Ports and the redevelopment of King’s Cross,” he added.

“There are large pools of high-quality talent, a stable and reliable legal and regulatory environment, and many like-minded partners to work with. There is also a strong cultural fit.

Wayne Fitzgibbon, a partner at Mercer, the professional services firm, said it made “logical” for Australian pension funds to grow in the UK, given the government’s push to attract more local and foreign capital with its “big bang investment” initiative.

“The type of infrastructure opportunities in the UK – particularly social infrastructure and affordable housing – will provide diversification benefits in a global portfolio,” Fitzgibbon said.

“The same goes for building greener real estate or converting existing properties into sustainable buildings. The same goes for related private debt opportunities.

As part of its global expansion, AustralianSuper, which manages the pensions of 1 in 10 Australian workers, will double the staff of its London office from 50 to 100. The fund also last week appointed Eloy Lindeijer, a former director of investments of the Dutch pension fund PGGM, to support its European investment activities.

Details on the scale of the company’s ambitions come with a broader push by global pension funds into private markets, amid a darkening outlook for public equities and continued pressure on investors. low interest rate returns.

Last year, the Caisse de depot et placement du Quebec (CDPQ), the Canadian-based C$400 billion global investment group, unveiled plans for a C$15 billion spending spree (9 billion) in private assets in the UK and Europe.

In 2021, the C$227 billion Ontario Teachers’ Pension Plan also unveiled a C$70 billion (£40 billion) push into international private markets, covering assets ranging from from infrastructure to real estate.

Mary I. Bruner