Australian Retirement Trust to concentrate on infrastructure, private markets with London office

The $280bn super fund Australian Retirement Trust has opened an office in London as it pursues infrastructure and private markets opportunities.

Australian Retirement Trust chief investment officer Ian Patrick.

Australian Retirement Trust, the nation’s second largest superannuation fund, has opened its first overseas office as part of an offshore push for growth.

ART, which has $280bn in assets under management, has set up a small team in London as it seeks to take advantage of investment opportunities in the UK and Europe – particularly in infrastructure and private markets – while managing its current assets in the region.

ART chief investment officer Ian Patrick said it was a step that had been under consideration for some time and would expand the fund’s investment capabilities.

“It serves our members well now because of our size and the significance of some of our key partnerships with investment managers and trusts, our private market assets in particular,” Mr Patrick said.

While 40 per cent of the fund’s assets are currently outside of Australia, Mr Patrick said more and more of members’ funds were being deployed overseas to capture global opportunities.

“Of every dollar coming in the door now, somewhere between 55 and 70 per cent would likely go offshore. And that’s because the opportunity set is significantly broader (overseas),” Mr Patrick said.

Real assets and private markets form part of that opportunity set in the current market, he said.

“On a forward-looking basis, (real estate) is one area of the market which has started to appear more attractive on a prospective basis in terms of relative returns. So (we may) add selectively to real estate in the foreseeable future, which is not something we would have said 18 months ago,” Mr Patrick said.

Within real estate the fund has had a long-term focus on the alternative sectors, including student housing and self storage.

ART follows peers AustralianSuper and Aware Super in establishing an overseas presence.

But while both of these funds manage a decent chunk of their assets internally – Aware Super manages about 30 per cent in-house, with ambitions to get to 50 per cent, while AustralianSuper manages about 60 per cent in-house – ART head of global real assets Michael Weaver said the fund had no plans to internalise asset management.

“Given the size we are today, being able to capitalise on (the expertise of external managers) with people on the ground is helpful. This is not a step of significant internalisation,” he said.

More than 90 per cent of ART’s assets are externally managed, though it does manage its Heathrow Airport investment directly. This was one factor in choosing London as the location of its first satellite office.

A team of three set up shop in trendy Marleybone in mid-March and the fund plans to grow its presence in the UK incrementally.

But it is not expected to be a big operation. Instead, the focus will be on a select few working with external managers and taking advantage of being closer to new investment opportunities as they come up.

“And the proximity to large assets which we have in the UK and Europe, (including) Heathrow Airport, knowing how those assets are tracking to the strategic plans is important,” Mr Patrick said.

On listed markets, equities were looking “reasonably full valued”, particularly given the economic and political backdrop, but were nowhere near as frothy as they were in 2000 at the peak of the dotcom bubble, he said.

“While we’re happy with the level of exposure to equities within our strategies … at this particular point in time we see the relative value equation between equities, fixed income and private markets as a whole is far more balanced than it was some time ago,” Mr Patrick said.