AustralianSuper eyes private markets in offshore push

The nation’s largest super fund sees opportunities in private equity, infrastructure as it looks offshore for growth.

AustraliaSuper chief investment officer Mark Delaney. Picture: Eugene Hyland

Private equity and infrastructure are among the better investment opportunities in the market right now, according to superannuation giant AustralianSuper.

“We think there’s opportunities to deploy money in private markets, which have been starved for cash. Both private equity and infrastructure to some extent, and even some private debt, in those markets the pricing hasn’t gone up as much as listed markets, and they represent pretty good opportunities,” the $300bn super fund’s chief investment officer, Mark Delaney said on Bloomberg TV on Monday.

The investing landscape had changed from a couple of years ago, when competition was more heated, he added.

“Now is a better time to put money into private markets than two or three years ago, when valuations were more expensive, and deals were quite scarce, with a massive amount of capital going in,” Mr Delaney said.

“The inability for a lot of US pension plans to recycle capital has meant that private deal opportunities are increasing because they’re not competing as heavily as what they were previously.”

Headwinds including rising interest rates, higher inflation and valuation mismatches between buyers and sellers have hit private equity in the past couple of years, but the sector is ripe for a rebound, in part due to ageing portfolio assets, which will act as a push to get deals over the line.

AustralianSuper, the nation’s largest super fund with $300bn in assets under management, currently has half of its portfolio invested overseas. Going forward, Mr Delaney said it will be pumping two thirds of its money offshore as it eyes better opportunities outside of Australia.

“This reflects, basically, we’re becoming quite large for the Australian marketplace. Opportunities to invest in the global marketplace, I think, are pretty much across the globe,” he said.

“In the US, the equity market is still in pretty strong condition if you look at some of these large companies, although valuations are becoming expensive. Global fixed interest isn’t too bad of an investment, given how far rates have risen. Floating rate debt is offering returns of up to 10 per cent in some cases, so also looks attractive. And there are other markets as well which are worth considering.”

On listed equities, Mr Delaney said the big seven technology stocks dominating US markets still had room to grow.

“When you look at these big top seven stocks, and have a look at what their businesses are, what’s really interesting is that they all operate in different sectors, but they’re disrupting traditional sectors.

“When you look at the market share these new business models have and the total market for advertising or for retail or cloud computing, it’s still relatively low compared to the existing or conventional business models. And that I think is interesting because there’s potential for them to grow further into the future.”

The digital transformation in the US was more advanced than in other economies, including Australia, he said.

“I’ve been to the US quite a lot in the last six months, and what strikes me is how big the digital transformation is in the US economy. For people outside the US … It’s nowhere near as advanced, and you don’t quite get an idea of how dramatic it is.

“I think digital disruption is the biggest and most dominant theme operating through markets.”