AustralianSuper’s Focus on Private Equity and International Expansion

Pension fund AustralianSuper has big plans to expand its overseas presence, including a desire to double its private equity exposure.

Originally published in the January 19th edition of Transacted.

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With nearly A$300 billion of assets, the fund is Australia’s largest and among the top 20 global pension funds—and the expectation is that assets will hit more than A$700 billion within the next few years.

That’s a lot of money for a relatively small domestic market to soak up, prompting the fund to target more than 70 percent of its future deployments to assets outside Australia. As it works to build an investment infrastructure that can support the strategy, AustralianSuper has accelerated its international footprint over the last 24 months, including meaningful headcount growth in its London, New York, and Beijing offices.

New York, in particular, is central to the fund’s plans: This week, AustralianSuper opened a new Manhattan office in an event attended by New York’s mayor and representatives from several U.S.-based managers, including TPG, Churchill Capital, and New Mountain Capital.

“If you can’t be good at finance in New York, you can’t be good at finance,” Chief Executive Officer Paul Schroder told Bloomberg at the event. The office is expected to grow to around 130 employees over the next three years.

Private Equity: Big Dollars for a Small Group of Managers

The aggressive expansion is also based, in part, on a desire to capitalize on a current market environment that may be more attractive for new cash than the heights of 2021 and 2022. At the same New York event, Chief Investment Officer Mark Delaney noted that he believes the most attractive fund vintages are those immediately after “tough times.”

Per Axios, the fund’s U.S. private equity strategy is targeting around one-third of its deployments to be investments in funds, another third in syndicated co-investments, and the remainder in co-underwriting opportunities alongside GPs.

Historically, AustralianSuper’s typical fund commitments range from $200 to $500 million, with a preference for more concentrated positions at the higher end of the range—the fund is currently invested with just 10 U.S. private equity managers.

In addition to New Mountain and TPG, other commitments include Leonard Green, Platinum Equity, Roark, Silver Lake, T.H. Lee, and Vista Equity Partners.

Allocations to co-investment opportunities range between $50 to $500 million, and the fund has flexibility for co-underwriting check sizes that can reach north of $1 billion. Notably, the fund plans to avoid making any direct investments itself.

Private Credit Falls Out of Favor

In 2022, AustralianSuper committed an additional A$7 billion to global credit, and, in December of 2023, highlighted its plan to triple this exposure via a mix of its in-house direct lending and new partnerships with outside managers.

Those comments came in conjunction with the announcement of a renewed commitment to Churchill Asset Management, Nuveen’s private credit arm, growing in size from $250 million to $1.5 billion. At the time, AustralianSuper Head of Private Credit Nick Ward underlined his bullishness on the asset class: "From a private market perspective, we think it beats infrastructure and property."

Whether the fund’s attitude has since changed, or internal strategy hasn’t quite aligned, Chief Investment Officer Mark Delaney appeared less enthusiastic this week.

“There’s no doubt that private credit’s attractive. The spreads are substantial, with double-digit returns,” he said. “But you’re getting double-digit returns because interest rates are higher, and you are assuming there’s going to be very low defaults. And both those things may not be sustainable in the long run.”

Either way, AustralianSuper is “open for business,” says Schroder. “We’ve got the ability to write big checks.”

Sam Hillier

Sam Hillier is a reporter at Transacted covering private equity and investment banking. He previously spent time as an investment professional focused on direct buyouts, as well as an earlier strategic advisory stint.