AustralianSuper is in the middle of planning what its international expansion might look like over the next 10 years. We speak with Damian Moloney about the journey so far
AustralianSuper expects its international offices to play an increasingly important role as the fund heads towards $500 billion in assets under management, but the fund is not planning to open a spate of new offices, beyond the ones it has in London, New York and Beijing.
In an exclusive interview with [i3] Insights, Damian Moloney, Deputy Chief Investment Officer of AustralianSuper, says the fund expects more than 40 per cent of its assets will be managed in its overseas offices by 2030.
“Last time we did [this exercise], we expected around 40 per cent of the portfolio to be run from the international offices. That was a long-term plan out to 2030. That may change a little bit with the new international equities appointment,” Moloney says.
There's probably going to be more of a tilt towards international over time. But it doesn't mean that the investment program in Australia slows down because money still goes into that market
AustralianSuper appointed Mark Hargraves as Head of International and Private Equity in August last year and he will build an internal international equities team based in London.
The fund already has 50 per cent of its $300 billion in assets invested outside of Australia, including $85 billion in the United States and $40 billion in the United Kingdom and Europe. Going forward, AustralianSuper expects around 70 per cent of new inflows, or circa $20 billion annually, to be invested globally over the long run.
The international offices will run predominantly internal portfolios, while the externally managed assets are still run from Melbourne, Moloney says. Over the next 10 years, AustralianSuper expects around 75 per cent of members’ money will be managed by internal teams.
“There’s probably going to be more of a tilt towards international over time. But it doesn’t mean that the investment program in Australia slows down because money still goes into that market,” Moloney says.
“In the various sectors that we work in down there, it just means that the percentage allocation to international increases. I think you’ll see all big funds do that; everyone is getting to that natural limit in Australia and looking to diversify and expand the portfolio offshore.”
Establishing Offices
Moloney was appointed as Deputy CIO effective 1 July 2023 and is now responsible for implementing the investment platform and strategy abroad, but he will also remain in charge of the overseas expansion of the fund.
In January, AustralianSuper’s New York office at 1251 Avenue of the Americas was officially opened by New York City Mayor Eric Adams, Chair Don Russell and former Chair and current Consul-General to New York Heather Ridout.
But Moloney has no plans to open a vast chain of overseas offices, beyond the ones it has in New York, London and Beijing, and emphasises the need for simplicity and cost control in the fund’s growth.
“The one thing we learned strongly and clearly when we set up the international businesses was the need for scale and simplicity. We only have two big offices and the one small research office in Beijing,” he says.
“A lot of our peers are all over the place with multi-regional offices and people spread everywhere. We know that model is harder to run. It’s also more expensive.
“AustralianSuper has been pretty sort of careful about how we do it. It’s really just been fairly conservative and linked to what the portfolio and portfolio managers needed.”
A lot of our peers are all over the place with multi-regional offices and people spread everywhere. We know that model is harder to run. It's also more expensive
Moloney just finalised implementing a five-year plan for international expansion, which included the establishment of an investment function and strategy for its London office. The London team now covers most sectors, but is still looking to increase its capabilities in public, private and capital markets.
Moloney has now turned his attention to the strategy for the next 10 years, which includes planning for the fund’s New York activities, an exercise that will take some months to finalise.
“In New York, we’re just working through the planning exercise and that is going to flush out exactly what we want to do. At the moment, it’s all private markets with quite a strong private equity content,” he says.
“Whether we want to do public markets there or capital markets, we’re just working our way through that. If we do, it would be more modest relative to London because the set-up in terms of back-office support and infrastructure is already here. We would want to maximise that rather than replicate it.”
AustralianSuper has added a number of staff in its London office, including six senior executives. Moloney says the fund was helped by the large number of Australians in London, who know the brand and the Australian superannuation market.
The fund plans to grow the international team to 300 people over the next three years, although recruiting for the New York office has been harder.
“In New York, the office was held up by COVID, then we started recruiting in quite a hard recruitment market. It was pretty hot post COVID. There were quite a lot of challenges, but since that time, we’ve actually got really good traction now. But there are definitely fewer expats, so that’s a harder market for us,” Moloney says.
Moloney expects the London office to remain the largest internationally, in terms of staff, but not necessarily in terms of size of the portfolio that will be managed there.
“It has always been the case that London will be bigger, mainly because this will be the major capital markets hub. [But] it doesn’t mean the portfolios will be the same size because the US market obviously attracts more capital. So it may be that the capital invested there will be slightly bigger,” he says.
AustralianSuper has already reaped many benefits from having a presence overseas. Boots on the ground really does make a difference, Moloney says.
“The private equity team in particular finds that the ability to work closely and directly with their GPs in New York has been a real advantage to them. It’s just built a bit more trust, but it also builds more confidence from the other side that we’re there, we’re committed and that what we are saying is actually true,” he says.
“On the public market side, we’re starting to see information flows that are useful to us. So we’ve got a small asset allocation team in London and they’re obviously closer to the market, more tapped in and have the relationships around the place. So all that information can flow back into the broader decision-making in Australia.
“The other thing that’s been a huge plus is access to different types of talent; talent that is sometimes not available in Australia. For example, we’ve had front and back-office specialists that we probably wouldn’t have been able to get in Australia. So we had to relocate those roles.”
__________
[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.