AustralianSuper eyes infra as it seeks to triple private debt holdings

AustralianSuper is looking to increase its private debt investments by A$10 billion ($7.4 billion; €6.3 billion) in the next three years, with plans to build its private credit teams in London and New York already in motion.

Australia’s largest super fund – which currently has over A$5 billion in private credit and is aiming to increase its portfolio to A$15 billion – has a strong liking for infrastructure and a preference for direct lending, according to its newly promoted head of private credit Nick Ward.

“We really like the sector in terms of the risk/reward opportunity for private credit. Within our mid-risk portfolios, we see private credit and infrastructure equity investments as our top two priorities,” Ward told Infrastructure Investor.

“Where we’re able to [lend] directly, we’re a bit more in control of our own destiny in terms of what we actually invest in, rather than investing through blind pools with managers. We’re also saving management fees by bypassing fund managers, [which] means that we can generate a higher return for members.”

AustralianSuper targets loans greater than A$100 million and last year played a hand in supporting Heathrow Airport and a portfolio of toll roads in Spain through the worst of the covid-19 pandemic.

“Both [assets] were down 90-plus percent on traffic [during the height of the pandemic] versus the prior year. Fortunately, the Spanish toll roads have bounced back remarkably quickly,” Ward said.

The overall tranche for Heathrow Airport was £750 million ($1.04 billion; €881 million), of which AustralianSuper invested half alongside another infrastructure debt manager, Ward added.

“We were already invested in some debt at Heathrow Airport… they looked to raise this additional financing where we effectively slipped from a higher part of the capital structure down into a more deeply subordinated position, as well as upsizing our investment,” Ward said.

In order to facilitate its plans to triple its private debt investments globally, the fund will be appointing six more staff to its private credit team in the next 12 months, Ward said. The team currently consists of seven staff in the fund’s Melbourne head office and three in London, with the new hires all expected to be offshore.

“[We’ll be] further boosting our London presence and replicating in New York what we’ve done in London. [We’ve found] the local presence extremely useful in getting access to new opportunities,” Ward said.