Picture: ISTOCK
Picture: ISTOCK

London — Australia’s largest pension scheme, AustralianSuper, plans to increase the portion of its portfolio invested in unlisted assets to around 30% from 20% over the next three years, its investment chief says.

With investments of A$160bn ($110bn) — a fifth of which is in infrastructure, real estate and private debt — it expects total assets to nearly double in the next five years as Australians are forced to save more under the country’s compulsory retirement scheme.

That influx of new cash is underpinning a major expansion overseas, including in the US and Europe, where it plans to hire aggressively in London.

Overseas markets are also likely to grab the bulk of the increased investment in private assets, chief investment officer and deputy CEO Mark Delaney said, tapping around half to two-thirds of the likely A$16-A$20bn in new money.

Despite confidence that more private capital will be needed to fund the world’s critical infrastructure, rising regulatory risk and strong competition from rival institutional investors could yet impact the near-term flow of deals.

“It will really depend on the supply [of deals], but our underlying assumption is a significant proportion of those will have to be international deals,” he said at the fund’s offices in London’s Kings Cross district, which it helped redevelop.

AustralianSuper is currently getting around 10% of its assets in new cash every year from savers and, when added to market growth of 7%-8%, “you can see you clock up 20% growth per annum pretty easily”.

While the scheme preferred to invest in infrastructure over real estate, Delaney said the British market had slowed considerably over the last couple of years, with very few assets coming to market.

“Our preference is for infrastructure over property, subject to the regulatory risk around infrastructure. In the UK, the two critical issues are Brexit and potential re-regulation of infrastructure assets.”

Britain’s opposition Labour Party has pledged to re-nationalise a range of industries, including the electricity grid, water supply, the rail and mail systems, hitting values and spooking investors.

AustralianSuper has around A$11.4bn invested in Europe and A$7.5bn in Britain, with the latter split 50-50 between listed and unlisted investments.

Its biggest UK investment is in Kings Cross, in which it has a two-thirds stake, said Delaney, although he declined to give a precise value for the investment.

Other unlisted investments include the main shopping centre in London satellite town Milton Keynes and a chunk of Manchester Airport, through infrastructure fund investor IFM.

It also owns equity stakes in companies including London-listed drinks maker Diageo, where it is a top-60 investor, and consumer goods company Reckitt Benckiser, where it is a top-100 investor.

While the scheme had a preference for more direct infrastructure investments, it was open to investing in funds and could link up with new fund partners.