AustralianSuper is pushing ahead with its overseas expansion as it seeks offshore assets. The superannuation industry is expected to continue its exponential growth and the fund will likely reach A$1 trillion within the decade, according to its chief executive.
“The way we think about it is we are too big for Australia. There’s no question about that. More of our assets are managed outside Australia than they are inside. Six or seven of every 10th new dollars will be managed offshore,” Paul Schroder, chief executive of AustralianSuper, said during a live webinar hosted by Reuters on Tuesday (August 16).
Schroder was responding to a question about what he thought about the superannuation industry relative to the Australian market. The superannuation industry in Australia holds AU$3.4 trillion of assets, making it the fifth largest pool of such capital in the world, according to the Organisation for Economic Co-operation and Development (OECD).
AustralianSuper is one of the country’s largest super funds with A$270 billion of assets under management (AUM), comparable only to the Australian Retirement Trust, which similarly has over A$200 billion AUM. Australian Super is projected to be a AU$1 trillion fund within the decade, Schroder said.
The super fund has also been growing its overseas presence. He said that its London office now has about 70 people, while its New York office, which opened last year, has 150-200 employees.
The fund had decided to change its model and expand offshore because if it did not, “we would end up having a bit of a performance drag or diversification complexity,” he said.
Compared with other pension funds in Canada or Europe for instance, Australian super funds are defined contribution plans rather than defined benefit, which gives the Australian funds the flexibility to invest in asset classes such as unlisted infrastructure, he said.
AustralianSuper was part of a consortium of investors that took Sydney Airport off the Australian Securities Exchange (ASX) last year after a long negotiation process that landed on a AU$23.6 billion takeover, at AU$8.75 a share.
In reference to the takeover, Schroder said that the Covid period taught the team “a great deal about the valuation process”.
“We built a robust valuations capability sitting over the top of the evaluations committee,” he said. “We have very robust processes that bring together the asset class plus the independent value, plus the separate valuation expertise, and then we crunch that through governance processes.”
He added that the team has never been reluctant to mark things up or down when it was warranted or up when it's warranted, but there is sometimes there's a mismatch between what the member wants to do and what you can get away with in the market, particularly when it comes to unlisted assets and infrastructure.
However, he reiterated that he had confidence in the super fund’s processes. “It’s always in our interest to make sure that things are on our books as close as possible to what a listed value would be,” he said.