Australia's largest retirement fund plans to more than double allocation to private equity using new offices in London and New York to hunt for global deals.
Private equity will rise to about 10% of AustralianSuper's assets over the next few years, up from the current 4% to 5%, said the firm's head of equities, Innes McKeand. The switch is part of a broader push for more of its A$165 billion ($111 billion) to be invested in assets outside of its home country and increase the percentage of money managed in-house.
"As a long-term investor our influence and scale allow us to take on more liquidity risk," he said in an interview. "Those markets, if done right provide a premium return, call it a reward for illiquidity," McKeand said when explaining the focus on private markets. "If you look at our peer funds globally that is the direction they have been taking."
Large institutional money managers including pension funds and sovereign wealth funds are looking to allocate more money to private equity and non-listed assets as part of efforts to diversify beyond stocks and bonds.
In other comments, Mr. McKeand said:
- AustralianSuper will continue to co-invest on deals and will extend into co-underwriting with a plan to hire more private equity veterans.
- Funds will increase their current 45% weighting to non-Australian assets.
- The percentage of money managed by AustralianSuper staff is set to rise. Currently 40% is managed in-house. Equities will go to 70% by 2023.
- New offices in London and New York will make it easier to source private market deals. A London office will employ 50 people within four years and a New York team will grow to around 30 when it starts later in 2019.
- The King's Cross redevelopment project in London, in which AustralianSuper has a majority stake, is a "poster child for investing in private markets." The "attraction of the asset was it grows as the fund grows so we can put more money into it."
- The firm already has more than a 20% weighting to real estate and infrastructure.