Australian public pension funds helped take Sydney Airport private, affirming Global SWF’s analysis that Australian real assets are a hot target for investment despite the challenges facing the aviation sector.
This month, Sydney Aviation Alliance (SAA) — the Australian-led consortium comprising IFM Australian Infrastructure Fund, AustralianSuper, Australian Retirement Trust (ART), IFM Global Infrastructure Fund and Global Infrastructure Partners — agreed a A$32 billion acquisition of Sydney Airport, which was listed on the Australian Stock Exchange. UniSuper, another Australian PPF serving the education sector, already had a 15% public equity stake.
Global SWF awarded Australia “region of the year” in our 2022 Annual Report. The country attracted US$23.8 billion in investment in real estate, infrastructure assets and private equities in 2021 and we forecast that the trend would persist as the government drives forward its infrastructure program, capitalizing on the country's geographical and resource strengths to play a leading role in regional economic integration.
Although Canadian public pension funds have featured feature prominently in the Australian markets, representing 31% of the total sovereign capital in the country since January 2016, their Australian counterparts are also taking seriously the market’s long-term prospects.
What distinguishes Australia from other markets is the role of domestic funds, which often establish consortia with foreign SOIs in bidding for big ticket assets – Sydney Airport being a case in point. Australia hosts nine federal-level funds with combined AuM of US$ 736 billion in 2021, and 11 state-level funds with US$ 428 billion – altogether, the country has US$ 1.2 trillion in its balance sheet spanning sovereign wealth funds and superannuation funds.
The most prominent and active federal funds are the Future Fund, AustralianSuper and the newly-created ART, which is the second largest federal superannuation fund and was recently formed from the merger between QSuper and SunSuper.
Domestic PPFs often team up today and sometimes work with foreign state-owned investors. For example, last year CDPQ subsidiary Ivanhoé Cambridge of Canada teamed up with AustralianSuper and TCorp to acquire the Moorebank Logistics Park for a total of US$ 1.5 billion.
Global SWF’s latest annual report noted that there are opportunities for growth in Australian infrastructure, particularly in the fast-growing renewable energy segment. Transport infrastructure will remain a growth area, the majority of which will be comprised of road construction. The government's 10-year US$ 79 billion Infrastructure Investment Programme (IIP) will drive investment in roads with SOIs likely to pay interest in roads of strategic importance, which connect businesses to local and international markets. Airports, seaports, and railways will also remain highly attractive – areas where foreign sovereign investors and domestic public pension funds have already established investments. SOIs could also play a role in helping deliver upgrades and the construction of transport corridors.
Last month, Global SWF highlighted the US$7.7 billion blockbuster deal backed by four Canadian public pension funds to acquire Australia’s AusNet electricity network. Canada’s Brookfield Asset Management led the consortium, which included the Alberta Investment Management Corporation (AIMCo), Healthcare of Ontario Pension Plan (HOOPP), Investment Management Corporation of Ontario (IMCO) and PSP Investments as well as Australia’s Sunsuper Superannuation Fund. The size of the AusNet takeover beats the of US$3.7 billion takeover of Spark Infrastructure in November by a consortium of private equity giant Kohlberg Kravis Roberts (KKR), the Ontario Teachers’ Pension Plan (OTPP) and PSP Investments.