In 2024, AustralianSuper continued to lead by example, demonstrating consistent performance, leadership in sustainability, and strategic growth through its overseas offices in New York and London. For its leadership among Australian superannuation funds, for its growing investment activity and for its significant international expansion, Global SWF believes that AustralianSuper is a worthy recipient of the 2024 Fund of the Year award. We were delighted to present it to Damian Moloney, Deputy Chief Investment Officer of the US$ 246 billion fund, and to speak with him about the fund’s recent figures and future ambitions.
[GSWF] The consolidation of the Australian superannuation industry seems to have slowed down after a few years of frenzy activity. Is there any additional merger in the horizon for AustralianSuper?
[AusSuper] Although merger activity has slowed in the past 12 months, we are now starting to see the positive effects of the consolidation that has occurred in recent years. Some of the largest funds, including AustralianSuper, are using their size and scale to expand their operations to international markets as well as investing in internal investment, operational and risk management capabilities. As the system continues to grow – from around AU$ 4.0 trillion today to more than AU$ 5.0 trillion by the end of the decade – we think consolidation within the sector will continue (although perhaps at a slower rate), which will ultimately drive better outcomes for both members and employers.
We have no current plans for mergers and would only consider one if we thought it would benefit the members on both sides of the transaction and where there is a strong alignment in values and culture between the funds.
[GSWF] AustralianSuper is today the world’s 17th largest pension fund, and the largest one in the Southern Hemisphere, with AU$ 355 billion (US$ 246 billion) in assets – where will the fund be in 2030?
[AusSuper] The Fund is still in accumulation phase, and with strong net cashflows of more than AU$ 20 billion, we are growing rapidly. By 2030 we expect the Fund will be managing in excess of AU$ 650 billion of assets on behalf of around 4.5 million members, with around 70% of new capital being invested outside of Australia.
The real challenge for us is to build the platform to be able to invest at scale and manage a large, globally diversified portfolio. One of the big strategic focuses for the Fund has been the build out of our investment teams and operations outside Australia. We opened our first major offshore office in 2015, and we are now the only Australian pension fund with offices and investment teams in Australia, Asia, Europe and North America.
[GSWF] Some of your peers are changing the default choice for members, from “Balanced” to “High Growth” – do you have any plan to adapt the investment options to the evolving demographics of members?
[AusSuper] We currently offer a range of investment options for members and our default remains the Balanced option. At this stage we don’t lifecycle manage members; however, we continuously research member needs, changing demographics and broader factors so this position may change in the future if we believe it is in members’ best interest.
A really important area of focus we are spending more time on is how we can provide better guidance to members, so that they really understand their options in the accumulation phase, and the transition to pension products, and (hopefully) enjoy their retirement. We hope that by guiding members they will be able to make more informed choices for themselves. Based on increasing member engagement and expectations, we see this as a critical area of focus.
[GSWF] AustralianSuper is not growing its private markets investments at the same pace as its total portfolio (from 32% in FY2022 to 26% in FY2024) – what is your future target split?
[AusSuper] We currently have 26% invested in private market assets and will gradually grow this over the next three years as opportunities present. The allocation to private markets had trended down in the previous few years due to our view on markets, the opportunities presented and the strong relative performance of listed markets. However, we have maintained and built our origination, execution and asset capabilities in anticipation of a more active private markets investment program as the cycle changed, and which is now underway.
[GSWF] According to the 2024 annual report, you expect that 75% of your portfolio will be managed internally by 2030 (up from 50% today) – what asset classes will remain externally managed?
[AusSuper] We think managing a greater proportion of our portfolio directly through internal investment teams will benefit members over the long term, both in terms of our ability to access investment opportunities and drive performance as well as reducing costs over the long-term. That said, there are some asset classes – such as Private Equity – where we will continue to invest via external managers. We will also selectively use external managers in other asset classes where we need specialist expertise in a particular market or sector and where we think it’s going to result in a better performance outcome for members. Regardless of whether we are investing via external managers or not, we are continuing to build and deepen our investment expertise internally – particularly in our International Offices.
[GSWF] Where do you see growth in terms of asset classes or themes? E.g., is Private Credit a focus now? Could you please walk us through the significant investments in DataBank & Vantage data centers?
[AusSuper] A big focus for us right now is the expansion of our International Equities platform. About a third of total members’ assets is allocated to non-Australian Equities and approximately 30% of the International Equities portfolio is currently internally managed. Our plan is to increase this to a significant majority by 2030, aiming to create greater cost efficiency at scale and generate stronger returns for members. We recently made three senior portfolio manager appointments to the Fund’s London office, which adds to our internal investment capability and active asset management expertise, and we’re looking to grow the London team further in the coming year.
In the unlisted space, we are actively pursuing opportunities in Private Equity, Private Credit and in Real Assets (infrastructure and property). In the past 12 months we have made two significant data center investments, further growing and diversifying the Fund’s global digital infrastructure exposure, a sector we believe will help deliver sustainable, long-term performance for members. DataBank is the Fund’s first investment in the US data center market, and the second alongside DigitalBridge, following our European investment in Vantage Data Centers EMEA last year. AustralianSuper’s global real assets portfolio now totals nearly AU$ 60 billion, and it includes digital infrastructure assets across Australia, UK, Europe, South Africa, and South America.
[GSWF] Your domestic investments have decreased from 60% in 2017 to 50% today, to the benefit of the US and Europe. With the growth of the New York and London offices, how do you see this balance evolving?
[AusSuper] We will always be strongly committed to investing in the Australian economy; however, the Fund is now at a size where can benefit further by diversifying and expanding the portfolio globally. In terms of actual dollars invested, our investments in Australia have grown by around AU$ 100 billion in the past 5 years. The market in Australia is also only so big – for example the market cap of the NYSE is 16 times bigger than the ASX. So, we expect a greater proportion of new capital will be deployed in international markets in the future, which is one of the key drivers for building out our investment teams in London and New York.
[GSWF] Much has been discussed about geopolitics and the new world order – what worries you as the Deputy CIO of a global asset owner, and are there any mitigants AustralianSuper is adopting?
[AusSuper] The current environment seems unique because two wars are underway simultaneously – one in Eastern Europe and one in the Middle East. But politics and geopolitics are always a source of risk for economies and markets, whether through armed conflict, sanctions, or major policy changes following elections in democratic countries.
Like any uncertainty that can impact the performance of our investments, we attempt to identify geopolitical risks before they materialize and determine whether these risks would impact performance temporarily or permanently. Often, these risks would not justify adjusting exposures or avoiding certain markets, because we expect an economy to withstand shocks over the long term, and we are long-term investors. Sometimes, we judge an event like an election to present a material risk, so may adjust our exposures where we can, such as in liquid markets. So, there is no standard response to geopolitics – it depends on the issue, the magnitude and duration of the impact, and the market liquidity.
[GSWF] AustralianSuper has consistently scored very high in our best practices assessment, the GSR Scoreboard. How important is Sustainability for the fund, and how is the focus evolving?
[AusSuper] ESG and Stewardship issues are integral to the Fund’s investment process, and we believe they have an important role in managing investment risk and opportunity and in maximizing long-term returns for members. As a long-term owner, the Fund takes an active interest in the quality of corporate governance, sustainability and corporate social responsibility policies and practices of our investments. We believe that companies that best manage ESG factors are likely to outperform over the long term.
[GSWF] In the past three years, you have nearly doubled your personnel from 981 in 2021 to 1,911 today. Is this growth sustainable, and how many more people do you need to achieve your 2030 targets?
[AusSuper] Personnel growth is a reflection of the continued growth of the system and the sheer size and scale of the Fund – both in terms of assets under management and member numbers. We are achieving scale benefits and efficiencies as we grow, however there is a volume of activity that we need to manage.
The expected growth trajectory of the Fund has also meant that we have adapted our operating model to ensure that we’re building an organization that will sustain this growth over time, this has meant growth in areas beyond the member services and the investment teams in areas such as risk, technology/digital, data, finance, legal and other enterprise functions. We have also made deliberate choices in our operating model where we believe we can be either more effective or more efficient (or both) - examples include internalization of many investment teams and the internalization of critical member engagement points.
We expect our personnel growth to materially slow over the coming years, however we do expect growth to continue in key areas. We think this growth is sustainable, but it is certainly a challenge to ensure we are attracting the right talent, with the right capability, the right cultural fit and the right level of potential to grow their skill, careers and impact.
[GSWF] Lastly, what is your advice for young professionals reading this interview and wanting to work at a large sovereign or pension fund? What credentials and qualities do you value among your team members?
[AusSuper] Culture is key at AustralianSuper. We have a very clear purpose, and that is to help members achieve their best financial position in retirement. To deliver on this purpose, we know that we need to attract and retain the best talent and create a culture and environment that people want to be a part of. We’ve found that we’ve been able to attract top talent from a range of different backgrounds – people are attracted to the growth opportunity and the ability to help shape and grow the organization, as well as the strong purpose. With the opening of offices in locations like London and New York, the Fund is also now able to tap into a deep talent pool that is not always available in Australia – not just in Investments, but also in our Enterprise area as well.
