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Is offshore investing ‘inevitable’? UniSuper’s not so sure

While Australian Retirement Trust thinks massive scale makes offshore investing a must, not every fund wants to join the jet set, and UniSuper thinks there’s still plenty of opportunities to be had at home.

The international markets’ vast opportunity set, and the fact that many superannuation funds are now too big for the ASX, has meant that more and more of them are investing their money offshore and opening offices across Europe and North America.

But everything that comes with that overseas push – hiring local hands, coming to grips with cross-jurisdiction tax and legal requirements and working with a new pool of co-investors – makes the business of superannuation even more complex than it already is, UniSuper head of private markets Sandra Lee told the Morningstar Investment Conference on Wednesday.

“Infrastructure is attractive, but going offshore adds an extra layer of complexity,” Lee said. “You need the right talent and people on the ground… When you say you’ve invested in mobile towers in Europe, Europe consists of multiple markets and they all behave pretty differently, and UniSuper’s not looking to create offices in all of those markets.

  • “Our approach is very much to have strategic partnerships with high-quality managers that exist and function in those markets and we retain the investment decision-making and work in partnership with those managers and they do the detailed due diligence. Setting up offices across the globe and attracting the right talent; sitting here today, that feels quite challenging.”

    The fund might not have plans to summer in Europe with Australian Retirement Trust (ART), AustralianSuper and Aware Super, but it could get dragged along anyway. Finding places to invest $280 billion of member monies isn’t easy, says ART head of investment strategy Andrew Fisher, and with the fund forecast to hit $500 billion by the end of the decade it’s not going to get any easier.

    “It’s not going to be practical for us to maintain the level of domestic investment – particularly the listed market investment,” Fisher said. “Australia was one of the first movers in terms of privatisation of infrastructure assets as well, and the market is finding new and innovative ways of creating infrastructure – digital infrastructure is quite popular – but realistically there’s some underdeveloped markets offshore where we’re likely to see better opportunities.”

    But while offshore investment is an inevitability – and the megafund has recently announced the opening of a small London office that will focus on working with external managers – Fisher said that ART still prefers to stash its members’ cash at home.

    “We do have a real strong preference, wherever possible, for domestic investment,” Fisher said. “Our members are Australians, their liabilities are linked to Australian inflation, and the best protection against that is investments in the domestic economy.

    “We’ll certainly be strongly committed to investing domestically, but there is an inevitability with scale that we’re going to have to move offshore, and an inevitability  with being one of the first mover countries in the infrastructure space that can be sold, and offshore is definitely a focus for us.”

    Lachlan Maddock

    Lachlan is editor of Investor Strategy News and has extensive experience covering institutional investment.

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