Aware Super to prioritise direct investments over new fund commitments

Aware Super’s senior infrastructure portfolio manager Mark Hector told sister title Infrastructure Investor the superfund’s strategy has shifted to a point where it is prioritizing pure direct investments and fee-free co-investments, over any more commitments to blind-pooled funds.

The superannuation fund, which was formed from the merger of First State Super, VicSuper and WA Super last year, now has more than A$125 billion ($95 billion; €81 billion) in assets under management, placing it second on the list of Australia’s largest superfunds, behind only AustralianSuper.

Aware Super currently classifies its agriculture investments within its infrastructure portfolio, which sits at around A$9.5 billion in value.

Speaking as part of our annual Australia roundtable, Hector said the fund’s increased size and pressure to provide more value-for-money for members had led to an evolution in its strategy.

“We’re not really focused on supporting new managers or putting money into more pooled funds. Our mandate and overall fund objectives have evolved over the last year or so to a point where almost all our incremental capital needs to be deployed on a pure direct basis, or through meaningful fee-free co-investments and partnerships where we can add value as a larger, trusted, reliable, sophisticated investor,” he said.

Hector said this would not preclude the fund from working with new external fund managers in future, but that it was not a priority for now.

“We’ve done plenty of research talking to other global pension fund direct investors over the last several years, and every single major player still has meaningful external relationships, so that will be critical in our future deployment, too. But we’re seeking scale benefits and value for money for our members. That means we need to reduce that fee load and naturally increase the level of internalization,” he said.

The superfund has previously pursued a hybrid strategy, building out its direct investment capabilities in unlisted assets while still working with fund managers where appropriate.

The fund said that its infrastructure portfolio had performed well during the pandemic and had proved resilient. Associate portfolio manager Brent Snow Agri Investor in March that agriculture had been a particular “shining light” during the coronavirus pandemic due to its resilience.