UniSuper awards private debt mandate as institutional interest soars
Australia’s UniSuper, a $77.48 billion (A$115 billion) superannuation fund for the higher education and research sector, has hired Revolution Asset Management for a private debt mandate.
“In selecting Revolution we were cognisant of their origination capability and their complementarity with our existing public and private credit holdings,” Robert Hogg, head of fixed interest and macro research at UniSuper told AsianInvestor.
The separately managed portfolio tasked to the Sydney-based private debt specialist has been steadily deploying capital into senior secured Australian and New Zealand private debt since its establishment earlier this year.
“We are cautiously opportunistic. We are seeking attractive opportunities in Australian private credit where we are being appropriately compensated for complexity and illiquidity,” he said.
The value of UniSuper’s mandate was not disclosed.
However, Revolution’s history with Australian Catholic Superannuation (ACS) -- which was absorbed by UniSuper in a merger last year -- is noteworthy.
ACS was the first seed investor in the private debt specialist, pledging an initial A$50 million to the fund.
“We were aware of Revolution prior to the merger with ACS, but we got to know them better during the merger due diligence process,” said Hogg.
Institutional interest in private credit has climbed in the past 12 months, with family offices, insurers and pension funds telling AsianInvestor they are keen to invest in this space.
A recent BlackRock survey also noted that 68% of institutional investors in Asia Pacific plan to raise private credit allocations.
Current market conditions have created an ideal environment for private debt assets to diversify risk and deliver stable income, according to Bob Sahota, CIO at Revolution Asset Management.
“In this environment where we expect there will be higher volatility and uncertainty, many have chosen to allocate to the relative calm that the private debt asset class offers as many private debt managers correctly point out key positive attributes of private debt being floating rate, less correlation to public markets, steady income, security over assets and loan covenant protection,” Sahota told AsianInvestor.
However, investors should be acutely aware that in this volatile environment there is also a higher level of default risk for companies no longer able to maintain profitability and hence meet their debt obligations.
So not all private debt strategies will perform well, he said.
The specialist investment manager looks for opportunities that offer stable income from senior secured loans with compelling relative value across corporate leveraged loans, private asset backed securities, and real estate loans (excluding construction or development).
The Australian and New Zealand private debt portfolio has so far outperformed its objectives, delivering a 9.6% gross return at the end of March 31.
“The strategy is tracking above its target return of cash plus 4% to 5% per annum -- net of fees and expenses -- and aims to achieve this return with low volatility,” said Sahota.
While the current strategy for Revolution is focused entirely on Australian and New Zealand domiciled borrowers, Revolution is surveying the broader Asia Pacific landscape.
“The firm maintains a close eye on Asia and any relative value opportunities that arise which may lead to expansion into the region,” said Sahota.
“Given the firm’s conservative philosophy, only the more developed markets in Asia are envisioned for any future expansion plans."