AustralianSuper Boosts Private Credit Investment in US Mid-Market Companies

Summary

  • An investment collaboration between AustralianSuper and a US-based manager is targeting senior and unitranche loans to private equity-backed US middle market firms.
  • The fund manages upwards of A$300 billion, with $4.5 billion invested in global private credit.
  • AustralianSuper expects to triple its private credit investments in coming years.
  • Private debt and overseas markets are becoming a priority for Australia’s top pension funds.
  • The yield hunt has become crucial for the country’s pension funds as they shift their focus from asset growth to income generation for retirees.

Investment Strategy

Boosted by an initial $250 million in 2022, AustralianSuper has partnered with a U.S.-based manager to aim its sights on senior and unitranche loans to private equity-backed U.S. middle market companies. AustralianSuper, the largest fund in Australia, manages over A$300 billion and has made significant investments in global private credit – more than $4.5 billion.

Growth Plans

The superannuation fund has an ambition to triple its private credit exposure in the future. “The current environment is particularly enticing for expanding our private credit investments,” said Nick Ward, the fund’s head of private credit. As base rates have risen from zero to 5%, yields for senior lending to middle market companies are now ranging from 10-12%.

Industry Shifts

Australia’s largest pension funds are shifting their investment strategies, focusing on overseas private markets, particularly debt. Addressing the rapidly growing A$2.4 trillion pool of retirement savings, they seek new ways to invest beyond the domestic market.

Yield Hunt

The quest for yield is increasingly important for Aussie pension funds as they transition from an emphasis on asset growth to generating income for those nearing retirement. According to Andrew Kleinig, Head of Australia at Nuveen, the growing funds and aging population create higher demand for consistent income opportunities in the post-retirement stage.

Churchill, a specialist investment division of American asset manager Nuveen, operates as a subsidiary of TIAA.

The current exchange rate is $1 = 1.5244 Australian dollars.

Changes in this sector can notably impact currency movements and forex trading strategies, particularly those involving the AUD, USD, and other relevant international assets.

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