AustralianSuper, the nation’s largest pension fund, plans to ramp up private equity investments in India and Japan as it expands across Asia, betting on an improving dealmaking environment and favorable demographic trends.
Asia currently accounts for about 10% of the fund’s total private equity portfolio, a share that is likely double over the next three to five years, Lilian Fang, head of private equity for Asia Pacific, said in an interview. Private equity penetration remains much lower in Asia, she said, presenting “more and more opportunities” for the A$430 billion ($300 billion) fund.
AustralianSuper has about A$22 billion invested in private equity globally, equivalent to roughly 5% of total assets. That’s up from 4% in February, when the fund said the portfolio could more than double in size.
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The deeper push into Asia underscores Australian pension funds’ growing appetite for private markets even as the regulator steps up scrutiny of unlisted asset valuations. The region is increasingly being viewed as an important growth market for the A$4.8 trillion pension industry - known locally as superannuation - as funds seek to expand their investment footprint while receiving billions of dollars of inflows every week.
Fang said corporate reforms in Japan were presenting opportunities for her 11-member team based at the firm’s Melbourne headquarters. “The buyout market and the supply of the type of companies, whether it is public to private, all the carve up deals happening in Japan, we are starting to really see the traction,” she said.
Fang said private equity managers are also finding opportunities among companies with aging founders and no obvious successors. AustralianSuper is interested in areas including health care, consumer education and artificial intelligence, though it prioritizes the type of investment opportunity rather than specific sectors.
Healthcare is emerging as a major investment theme in places like India and Southeast Asia, driven by an expanding middle class, Fang said, adding that data centers in that region were also attracting the fund’s interest.
AustralianSuper invested more than A$3 billion across 26 private equity transactions in the financial year to June 30 and has added more than 15 new managers across North America, Europe and Asia over the past two years. This number will grow as the allocation to the industry increases, Fang said.