One of Australia’s largest pension funds, Rest, is set to significantly increase its private equity investments over the next two years, aiming for a 5% allocation by 2026, according to a report by Bloomberg.
Currently managing AUD85bn ($56.6bn) in assets, Rest has already expanded its private equity holdings from 1% in 2021 to 3% today, according to CIO Andrew Lill.
Lill expressed optimism about the timing for acquiring private equity assets, particularly targeting mid-market buyouts in sectors such as healthcare rather than technology.
In a Bloomberg interview in Sydney, Lill said: “We think it’s just an incredibly good time to be picking up assets that have a potentially lower return multiple on the way in.”
In contrast to some other Australian superannuation funds, Rest remains cautious about increasing its exposure to private credit. Although Lill did not disclose Rest’s current private credit holdings, he indicated that the allocation is small. “We think that private credit is an opportunity, but we are cautious of excessive flows into the area,” Lill stated, noting that many of the strongest returns in private credit may already have been realised.
Lill warned that the competitive landscape could lead to diminished returns for new private credit funds. “Once it becomes a ‘me too’ investment, often it’s time to start bringing your expectations and returns down,” he said, though he clarified that he does not foresee a crash or negative returns in the sector.
Other major Australian pension funds are also adjusting their private credit allocations. AustralianSuper, the country’s largest pension fund with AUD330bn under management, recently announced plans to increase its private equity allocation from 5% to 9% of its portfolio. Similarly, the Australian Retirement Trust, the second-largest pension fund, aims to grow its private credit position from just below 1.5% to 2.5% within the next six to twelve months.
