The Australian Retirement Trust (ART), a A$280 billion ($184 billion) superannuation fund, has expanded its operations to London as part of its strategy to enhance its global investment capabilities.

“Having senior team members on the ground in London is a strong signal of our intent to invest in relationship-building and maintain a long-term presence,” Ian Patrick, chief investment officer at ART, told AsianInvestor.

The move is in line with the fund’s significant international presence, with more than 40% of its assets located outside Australia and over A$25 billion invested in the United Kingdom and Europe, said Patrick.  

The UK office will house three of ART’s core infrastructure investment specialists, and Patrick does not anticipate significant growth in overseas headcount.

“I would be surprised if it exceeds 20 in the next three years,” he said, attributing this conservative approach to ART’s investment model, which focuses on relationships with specialist managers rather than internalising investment management or originating deals.

DIRECT INVESTMENTS

The opening of ART’s UK office comes as Australian pension funds increasingly look beyond their borders for investment opportunities, driven by the rapid growth of the country’s superannuation industry.

Large players like Aware Super and AustralianSuper have already extended their reach by establishing offices in other global financial hubs, such as London and New York.

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“Having an office in close proximity to our external investment managers will help us secure even more compelling investment opportunities for our members,” said Patrick.

ART aims to focus on direct investments mainly in infrastructure, real estate, and private equity, with a particular emphasis on sectors such as energy transition, affordable housing, innovation, life sciences, technology, and digital infrastructure, said Patrick.

“Initially, the London office will be dominated by infrastructure investments, with the team focusing on managing our investment in Heathrow Airport and building relationships with key infrastructure partners like Macquarie, KKR, and Stepstone,” he said.

Real estate is likely to be the next area of support, given its natural overlap with infrastructure within the real assets team, said Patrick.

“Private equity and private debt may be considered later, but the skill sets do not crossover as naturally as they do between infrastructure and real estate,” he said.

ART will not allocate a specific pool of capital to the London office, and all investment decisions will be made in the context of its total portfolio.

“We aim to avoid the potential pitfalls of having a dedicated allocation, such as pressure to fill the allocation or take on suboptimal deals. When considering an investment, we always pair the London team with subject matter experts from Australia to ensure appropriate risk consideration and alignment with our overall portfolio objectives,” said Patrick.

REAL-TIME ADVANTAGE

Patrick was candid about the limited impact the London office is expected to have on the fund’s overall growth.

“This doesn’t really influence the growth,” he said.

“If I think of our primary sources of growth in the portfolio absent returns, it is the ongoing systemic flow that we get by virtue of Australia’s mandated superannuation contribution system.”

The real benefit of a UK base is the potential for improved relationships and the ability to conduct due diligence in real-time.

“At the margin, it certainly does [change the way investments are done],” Patrick explained.

“Because we now have a capacity to interact with our partner managers in their own time zone, we have a capacity to co-diligence assets that they draw to our attention as opportunities for our portfolio alongside them in their home office or in their own timezone.”

One of the main challenges Patrick anticipates will be building relationships with new partners and co-investors who may not be familiar with ART.

Despite being the second largest super fund in Australia, it was only formed in 2022 following the merger between Sunsuper and QSuper.

ART has since gone on to absorb the Australia Post Superannuation Scheme and the Commonwealth Bank Group Super. Just this month, the fund also wrapped up its merger with AVSuper.

“There may also be challenges with managing deal flow and bandwidth if the pipeline becomes very full,” said Patrick.

“However, these challenges are outweighed by the opportunities, such as identifying and working with new partners and co-investors in their own time zone, demonstrating our approach as reliable long-term investors through existing investments like Heathrow, and providing development opportunities for our young professionals through rotations in the London office.”