Sandra Lee, Head of Private Markets, UniSuper

Sandra Lee, Head of Private Markets, UniSuper

UniSuper Increases Focus on PE

In Conversation with Sandra Lee

UniSuper has increased its focus on private equity, as the fund has made more direct investments. Florence Chong speaks with Sandra Lee about UniSuper’s approach to this sector and the role of partnerships

As they were casting around for opportunities to buy and own assets directly in the private market, UniSuper and its partner, IFM Investors’ Long Term Private Capital Fund (LTPC), spotted PRP Diagnostic Imaging (PRP), a NSW based radiology business.

PRP was first established by a group of doctors and bought by the Australian private equity group, Crescent Capital, in 2020.

UniSuper and the IFM fund competed against big-time investors like Canada’s pension plan OMERS, global investor EQT, US investor Stonepeak, and the Australasian manager Morrison & Co, for the stake in PRP.

The IFM fund and UniSuper won the day.

When the deal was finalised in November, UniSuper, a cornerstone investor in LTPC alongside Hostplus, went a step further. It took another approximately 30 per cent, direct co-investment stake to increase its interest in the scanning diagnostic business.

The partners have pledged to invest in both back-end technology and artificial intelligence-enabled software to generate efficiencies in the business. Its expansion plan is to offer new procedures and to open additional clinics.

Sandra Lee, Head of Private Markets at UniSuper, told [i3] Insights the fund worked with IFM to undertake the deal, which was executed under its direct private equity (PE) strategy.

The partnership worked for UniSuper, she says, because the fund was able to secure ‘a large piece of co-investment’ in the PRP business.
PRP is the first large deal for UniSuper’s relatively young PE unit, born out of a split of the fund’s rapidly-growing real assets portfolio.

Under a restructure, UniSuper’s Kent Robbins, who had oversight over both property and infrastructure, now concentrates just on property. Lee, who joined UniSuper from Perpetual in the mid-2000s, heads infrastructure and the private equity unit, grouped under the banner of private markets.

Today, the portfolio under Lee’s watch is valued at around $15 billion, most of that in infrastructure. Its investments include Australian airports, timberlands, mobile phone towers and toll-roads.

UniSuper is the most significant individual shareholder in both of the privatised Sydney and Adelaide airports.

The focus now is to beef up the fund’s PE exposure. Early this year, UniSuper appointed Suhki Lekhi as a senior investment analyst and Lachlan McLeish as an investment analyst to support growth in the Private Markets team

Lee says healthcare is one sector that appeals to the fund. UniSuper has done several healthcare deals, in partnership with both the public and private sectors.

Last November, UniSuper joined a consortium led by Plenary Group to partner with the University of NSW in developing a state-of-the-art healthcare, education and research complex, known as the Health Translation Hub, in the Randwick health innovation precinct of Sydney’s east.

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Part of this approach is developing smart partnerships... At UniSuper, what we mean is that rather than having relationships with, say, 100 fund managers – which some people do – we are highly selective

Due to be completed in 2025, the project carries a price tag of $600 million. The investment is particularly apt for UniSuper, which is the key industry super fund for higher education and research professionals.

UniSuper’s involvement with similar types of projects goes back to 2011, when it was part of another consortium, also led by the Plenary Group, which financed the Victorian Comprehensive Cancer Centre (VCCC) in Melbourne. UniSuper committed $93 million for a 49 per cent stake in the consortium’s equity funding on a 29-year term.

Lee looks towards more PE investment as the fund steps into directly investing in assets and businesses. The investment in PRP’s scanning business, she says, is part of the fund’s direct PE strategy.

“Part of this approach is developing smart partnerships. It is not that unique or special, but, at UniSuper, what we mean is that rather than having relationships with, say, 100 fund managers – which some people do – we are highly selective. We want to find a couple of, in our view, high-quality partners and work with them to give them volume and to build out scale.”

Such relationships, she says, foster better understanding of the fund’s specific approach and its investment preferences.

As an example, UniSuper has forged a close relationship with the large US global manager, KKR. Through KKR, UniSuper made its first direct offshore investment in Europe in May this year. The fund secured a five per cent indirect stake in the leading mobile towers business, Vantage Towers, for $1 billion.

Lee says that in a ‘hot’, unlisted infrastructure market, not only are assets expensive, but they are also difficult to buy without going through an auction process. “We don’t like auction processes because there is a tendency to potentially overpay, eroding a lot of future value,” she says.

“We saw this great opportunity in Vantage Towers. It is a very large European asset spun out of Vodafone in Europe. Vodafone initially listed the asset, but unfortunately, they listed at a challenging time in the market and the stock really didn’t flourish.”

Opportunity came when KKR and its partner, the New York-based Global Infrastructure Partners, decided to approach Vodafone to pitch a deal to take it private.

“Clearly, it was a big deal and they needed funding backers,” says Lee. “(But) the environment wasn’t conducive to capital raising, with potential investors opting to sit on the sidelines and watch.

“We took an opportunistic perspective and, in a review of the opportunity, found that it was actually a pretty good deal. We took the view that when other people stay away, good deals get done.

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People always talk about price, but to us both price and governance are extremely important. We were able to negotiate outsized governance relative to the economic interest

“We managed to secure the whole business at a pretty attractive valuation, but we were also in a position to negotiate much stronger governance terms. People always talk about price, but to us both price and governance are extremely important. We were able to negotiate outsized governance relative to the economic interest. We are delighted to have that deal.”

It took four months to get the deal across the line. For UniSuper, it is its single-largest direct investment outside Australia.

UniSuper has done bigger transactions than Vantage Towers, but they were done as a key shareholder in large public companies.

Lee gives as an example buying a 50 per cent stake in Transurban Chesapeake assets in the US from the listed Transurban Group for $2.8 billion in cash. In this 2021 transaction, UniSuper took a 10 per cent stake, while AustralianSuper had 25 per cent and Canada’s CPP Investments 15 per cent.

Lee says this is a unique deal because UniSuper is the largest shareholder in Transurban’s head stock. “We did that deal because we know and trust the management team,” she says.

UniSuper was a key player in the $23.6-billion privatisation of Sydney Airport in 2022. It parlayed its shareholding in the listed Sydney airport company into a 15 per cent stake in Sydney Aviation Alliance, the holding company for the now privately-owned airport.

UniSuper usually knows its partners well, but Lee says this does not replace the need to do ‘heavy’ due diligence to ensure that everything stacks up.

“In every investment that we do, we assess the merits and the risks, irrespective of how well we know our partners,” she says.


[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.