Creating opportunities with Australia’s globally emerging pension funds

Australia is a leading global pension funds market. With A$3.4 trillion in assets, forecasted to grow to over A$9 trillion in the next twenty years, the pension funds industry is the fifth largest market in the world.

Australian pension funds are now outgrowing the local market. We anticipate that they will continue, to explore opportunities in overseas markets to grow, maximise fiscal returns and diversify their portfolios.

Funds are becoming more sophisticated financial buyers, getting more involved in direct or major stake consortium transactions. Australian pension funds are using their weight by prescribing or discouraging certain types of investments. ESG and sustainability initiatives are growing in their portfolios.

We anticipate that international sovereign wealth funds and international pension funds will continue to look for opportunities and make key investments in Australia.

Foreign investors looking to partner with Australian pension funds both in Australia and overseas need to be mindful of a number of market and commercial considerations as well as unique legal, risk and regulatory issues.

Investment priorities and shifting focus create opportunities

Australian pension funds are getting more involved in direct and major stake consortium transactions both in Australia and overseas. Some of the pension funds have been active in acquisitions and recent exits to prove opportunities are available.

Australian pension funds have traditionally had a healthy mix of investments. They have been big investors in real estate and infrastructure assets in Australia and increasingly overseas.

Over the last five years, that has changed as they have pursued acquisitions of listed companies – but until recently only as part of a consortium led by private equity funds and other institutional investors. Given the reduction in the number of infrastructure assets coming to market in Australia, including a decline in the privatisation of Government owned assets, funds are looking at alternative investment opportunities, including in Australian public markets.

Commercial, risk and legal issues to consider

Australian pension funds are highly regulated, including by the Australian Taxation Office, Australian Securities and Investment Commission and the Australian Prudential Regulation Authority.

Foreign investors looking to partner with Australian pension funds both in Australia and overseas need to be mindful of a number of unique legal, risk and regulatory issues together with certain market and commercial considerations and conventions that may impact on their ability to take advantage of these opportunities.