“Too big for Australia,” says pension fund looking for global expansion

In an interview with Reuters news agency, Paul Schroeder said AustralianSuper, which manages A$260 billion in pension money in the country, plans to invest up to 70% of its capital abroad to avoid a “underperformance” by focusing on its home country.

“We are too big for Australia to accommodate,” Schroeder told the online event.

“We consider ourselves a global investor with local beneficiaries. It is true that we have been very focused in Melbourne and Australia, but overall we take the position on all our leads that we are global investors.”

Australian pension fund managers have benefited from a system introduced in the 1980s that requires employers to contribute an additional 10.5% of employees’ wages as pensions. As a result, the funds have plenty of money to invest but few assets to buy locally.

AustralianSuper now has up to 70% of its funds managed overseas, according to Schroeder. The organization had 70 employees in the London office, with plans to triple that workforce. Schroeder said a New York office focused on private equity investments is also growing.

The fund, which owns ports, airports, rail and road infrastructure in Australia, Europe and North America, said it aimed to have A$500 billion in assets by 2026, but Schroeder said it had a long-term vision. “We want to be a trillion-dollar investor,” he said within a decade.

“We are unabashedly looking for volume,” he said.

Schroeder said AustralianSuper did not have any specific investment target, but considered the unquoted assets well suited to its business in the current economic environment, as they typically provide “inflation protection”.

At a time of economic, geopolitical and logistical turmoil, Schroeder said the biggest challenge facing investments is inflation, and dismissed reports that interest rate hikes by the US Federal Reserve had begun to slow the overheating economy.

“You have to see some persistent signs to say that something has been done,” he said.

“Our view is that there are still very difficult times. We think we are in a tight environment. The question is, what is the pace of this tightening and is there a pivot around the corner?”

($1 = 1,4280 Australian dollars)