Too Much Money: Australian Pension Giant’s $11 Billion ‘Problem’

(Bloomberg) -- Australia’s largest pension fund has a cash flow problem -- too much of it coming in.

AustralianSuper Pty. saw inflows of A$16 billion ($11 billion) last year, fueled by people switching to non-profit pension funds as misconduct scandals trashed the reputations of for-profit peers. That posed a “real challenge,” said Shaun Manuell, a senior portfolio manager at the A$185 billion fund.

“We did a good job last year because we had spent the past five or six years getting our buckets right, working out where we want to place the money,” he said at a conference in Sydney Wednesday. “But the problem is just getting more difficult.”

Australia’s A$2.95 trillion pension industry, which sees 9.5% of a worker’s gross salary paid into a retirement fund each month, is growing exponentially. Firms that have typically favored stocks and government bonds are turning to riskier assets such as venture capital and private credit or investing offshore to meet return targets.

AustralianSuper is doubling its private equity holdings, exploring venture capital and expanding in New York and London as it sends more money offshore.

“Those overseas offices are going to be important just to sort of build those relationships for other opportunities,” Manuell said. “There is only so much money we can invest in the domestic market so that marginal dollar is increasingly heading offshore.”

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Having the capability to invest in listed and unlisted assets gives the fund added flexibility, he said.

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