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Pension fund AustralianSuper cautious on "expensive" infrastructure

Published 25/11/2016, 10:58 am
© Reuters.  Pension fund AustralianSuper cautious on "expensive" infrastructure

SYDNEY, Nov 25 (Reuters) - AustralianSuper, the nation's largest pension fund with A$105 billion ($78 billion) under management, would like to buy more infrastructure assets but not at any cost, a senior executive said, amid a global hunt for yield.

Last month, AustralianSuper invested A$2.5 billion as part of a consortium bid to buy electricity company Ausgrid for a total of A$16 billion. It was the fund's largest single direct investment. have appetite for more infrastructure acquisitions, at home or overseas, but we are cautious on the price as sometimes we feel it's expensive," Alistair Barker, co-head of macro and portfolio construction at AustralianSuper said on Friday.

Barker said it was challenging to find value for money, having increased the fund's exposure to infrastructure investments to over 13 percent, from around 9 percent in 2014.

"Places where the value is are places where the stress is," Barker said, singling out financial and materials sectors in emerging markets.

The investment manager said in the past year the fund had scaled back its equities exposure to 55 percent, from a peak of around 62 percent.

Barker sees some value in the world of credit, particularly compared with cash holdings. AustralianSuper is an active investor in high yield, leveraged loans, lending in real estate and infrastructure companies.

While AustralianSuper's main balanced fund averaged a return of between 10 percent to 15 percent in the past few years, that dwindled to 4.54 percent in 2016. Returns were likely to be modest again this financial year, largely because of the low interest-rate environment globally.

Around 20 percent of AustralianSuper's balanced fund is invested in real estate and infrastructure, 14 percent in fixed income and credit and the balance in cash, private equity and alternative products.

Australia's A$2.1 trillion pool of tax-advantaged retirement savings, know locally as "superannuation" or "super" funds is among the world's largest after the U.S., UK, Japan and Canada.

Super funds' holdings greatly exceed Australia's A$1.6 trillion gross domestic product and are set to reach nearly A$10 trillion by 2035, according to Deloitte. ($1 = 1.3497 Australian dollars)

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