Top Australian pension fund lifts private credit mandate to $1.5 billion

By Lewis Jackson and Archishma Iyer

(Reuters) -Pension giant AustralianSuper said on Wednesday it had increased a U.S. private credit mandate with Churchill Asset Management to $1.5 billion as part of plans to triple its exposure to the in-demand asset class.

The investment with the U.S.-based manager builds on an initial installment of $250 million in 2022 and will target senior and unitranche loans to private equity-backed U.S. middle market companies.

AustralianSuper, which manages over A$300 billion ($196.8 billion) and is the country’s largest fund, has over $4.5 billion invested in private credit globally, and aims to triple its exposure in the coming years.

“We believe the current environment is especially appealing to increase our investments in private credit,” the fund’s head of private credit, Nick Ward, said in a joint statement.

“Base rates have gone from zero to 5% so you are now looking at yields of 10-12% for senior lending to middle market companies.”

Private markets overseas, especially debt, are top priorities for Australia’s largest pension funds as they look for ways to deploy the rapidly growing A$2.4 trillion pool of retirement savings that is outgrowing the domestic market.

The global hunt for yield is especially relevant for Australian pension funds who are moving from a decades-long emphasis on asset growth, to a focus on income for members reaching retirement.

“Ever-growing funds and an aging population, mean post-retirement stage members are driving increased demand for consistent income opportunities,” Andrew Kleinig, Head of Australia at Nuveen, said in the joint statement.

Churchill is an investment-specialist affiliate of American asset manager Nuveen, itself a subsidiary of TIAA.

($1 = 1.5244 Australian dollars)