Australian Retirement Trust not yet targeting offshore investment teams

CIO Ian Patrick said funds running a hybrid model with minimal investment internalisation ‘don’t have quite the same need for a global footprint’ as others pursuing direct investments.

Australian Retirement Trust, the second-largest superannuation fund in Australia with more than A$260 billion ($173 billion; €157 billion) in assets under management, is not likely to build offshore direct investment teams in the way that some of its peers have started to.

Speaking at the ASFA Conference 2023 in Adelaide on Wednesday, ART chief investment officer Ian Patrick said that the question of whether to build investment teams offshore depended on a fund’s business model.

“When you’re running a hybrid model, where implementation is largely affected through third parties or alongside partners, I don’t think you have quite the same need for a global footprint,” he said.

“If you’re originating transactions and you need to be active with networks in those offshore capital markets, then you likely do need an office staffed with a meaningful number of people.

“Will we likely have more than a Sydney and Brisbane presence in the not-too-distant future? That’s quite likely. Will that be to, under our model, build teams of hundreds to originate transactions? No, it will not. It will be to supplement advice back to the domestic business in Australia, to allow it to be the most effective it can be in terms of access to time zones.”

Patrick was responding to a question about offshore offices following Aware Super’s well-publicised office opening in London, which has come with a pledge to invest as much as A$10 billion into UK assets. AustralianSuper has also hired investment professionals in the UK capital, as well as in New York.

Cbus Super deputy CIO and head of private markets Alexandra Campbell said her fund, which has more than A$85 billion of AUM, has internalised around 50 percent of its investments, without any strict targets.

“It’s really about the quality of the investments, rather than the quantity, that are done internally. Particularly in private markets, we’re an Australia-based organisation but a global investor, so [the hybrid strategy helps] us to deliver the best value for our members in terms of quality of portfolio, as well as efficiency on the fees side,” Campbell said.

“For me it’s about leveraging global relationships and getting the best value for the fees that we’re paying for that, [and] having opportunities to invest in assets that have been originated offshore for us, rather than trying to always be the one to do it internally. And take a situation [like] the take-private of a large organisation or a large listed entity – that’s not something Cbus would want to do by itself.”

On the relative merits of take-private transactions and whether it is preferable to hold certain types of assets in private or public markets portfolios, Campbell said liquidity was important from an overall perspective and that some risk profiles “just don’t suit a private market asset”.

“There have obviously been a lot of headlines about Origin [Energy], whether that should be a private or a public asset. And even from my perspective, with a big bias towards private markets, there are some risk profiles that just don’t suit a private market asset, and some cheque sizes as well that you don’t want to hold at that level in private markets,” she said.

“Some other factors that come into it, other than just the liquidity needed across the fund, is the skills and the time and the expense of investing in private markets, and the risk of holding illiquid assets… that might suit you very much today, but we’re not sure where it will go in five to 10 years’ time. Something like that might be better in the listed market.”