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Australian pension giant plans to double PE assets over next four years 

Australia’s largest pension fund AustralianSuper intends to nearly double its private equity assets over the next four years, a decision that comes as deal activity picks up following a period of reduced activity due to higher borrowing costs, according to a report by Bloomberg. 

AustralianSuper currently oversees A$330bn ($215bn) in AUM and aims to increase its private equity allocation from the current 5% to as much as 9% of its portfolio, a shift that is expected to raise total volumes to approximately A$35bn. This goal revises a previously announced 7% target that was set two years ago for 2024.

The report cites Mark Delaney, Chief Investment Officer at AustralianSuper, in an interview, who expected activity to rise and valuations to climb after a recent shallow pullback. He also noted that private equity prices had already hit their lows but had not reached the same affordability levels as previous downturns.

AustralianSuper’s focus on private assets aligns with broader trends in the country’s A$3.7tn pension industry, driven by substantial inflows and growing demand for offshore investments. The fund collaborates with 12-15 external private equity firms and has bolstered its US presence through its New York office, which currently employs around 40 people.

While global private equity deals in Q1 2024 reached $232bn, a 9% increase from the previous year, this figure remains significantly below the peak observed in Q2 2021 (over $600bn). Sellers’ insistence on valuations similar to pre-interest rate hike levels has posed challenges for deal execution.

As part of its broader strategy to access unlisted markets, AustralianSuper also plans to triple its private credit allocation to A$15bn by 2030 and recently increased an investment mandate with private credit specialist Churchill Asset Management to $1.5bn from $250m.

Delaney described US pension plans as an “opportunity” given their maturity and inability to recycle capital.

The report cited December data from Preqin in revealing that dry powder sits at a record $2.1tn, indicating that competition for unlisted assets has broadly increased over the years, with Delaney adding that AustralianSuper sees “more than 100 deals per year”.

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