“Too big for Australia”, says pension fund eyeing global expansion

AustralianSuper, which manages $260 billion of the nation’s pension funds, plans to invest up to 70% of its capital to avoid “performance drag” by focusing on the home country, Paul Schroder told Reuters Newsmaker in an interview.

“We’re very big for Australia,” Schroeder said at the online event.

“We see ourselves as a global investor with domestic beneficiaries. It’s true that we’ve been Melbourne-centric and Australian-oriented, but generally we’ve positioned ourselves as a global investor.”

Australian pension fund managers have benefited from a system introduced in the 1980s that required employers to pay an additional 10.5% of employees’ wages into superannuation. As a result, funds have plenty of cash to invest, but few assets to buy domestically.

According to Schroder, AustralianSuper now manages up to 70% of its funds offshore. The organization had 70 employees in its London office and plans to triple that workforce. A New York office focused on private equity investments is also growing, Schroeder said.

The fund, which owns ports, airports, rail and road infrastructure in Australia, Europe and North America, aims to hold A$500 billion in assets by 2026, but Schroder said he had a longer-term view. Within a decade, he said, “we want to be a trillion-dollar investor.”

“We’re unashamedly looking for scale,” he said.

AustralianSuper does not have a specific investment objective, but considers unlisted assets to be the best fit for its business in the current economic climate because they usually offer “inflation protection”, Schroder said.

At a time of economic, geopolitical and logistical turmoil, Schroder said the biggest challenge facing investments was inflation, and he dismissed reports that the US Federal Reserve’s interest rate hikes were starting to slow the overheated economy.

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“You need to see some continuous signal to say that something has been done,” he said.

“Our view is that there are still tough times ahead. We think we are in a tight environment. The question is, what is the pace of that tightening and is there a core in the corner?”

($1 = 1.4280 Australian Dollar)

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