SYDNEY, Sept 19 (Reuters) – The next 18 months is an ideal period for unlisted asset deals, the head of one of Australia’s largest pension funds said, as strong investment returns formerly low-yielding bonds or cash require private traders to offer buyers better terms.
Dealmakers had bargaining power during the years of low interest rates, when investors bid aggressively to try to secure a return, according to John Pearce, chief investment officer of UniSuper, which manages more than 120 billion Australian dollars ($77 billion).
But while UniSuper can earn a return of almost 7% on the relatively safe subordinated debt of Australia’s big banks, groups seeking investment are now forced to offer buyers better prices, lower fees and more governance rights, he said.
“Sometimes we’re the only ones at the table… you agree on a price without having to get into a bidding war,” Pearce told Reuters in an interview.
“If you have cash to deploy in the debt or private equity markets, you should be able to make smart deals.”
UniSuper in May paid A$1 billion for a 5% stake in Vantage Towers, a recently privatized European telecommunications mast company, a deal that Peace said would not have happened just two years ago .
The fund, established in 1982 for university workers, will concentrate its direct equity investments in Australia but is in talks to join forces with a partner for private debt deals overseas, Pearce said.
UniSuper returned 10.3% in its main investment vehicle in the financial year ended June 30.
Australia’s A$2.4 trillion superannuation industry has outgrown its country and many of the biggest funds are recruiting staff in London or New York to be closer to overseas dealmakers and the growing portfolio of direct investments of funds in Europe or North America.
UniSuper, the country’s fourth-largest fund, has no plans to open an overseas office, Pearce said, partly because of the difficulty in recruiting top talent. The fund will instead focus on listed investments abroad or work with partners.
“Are we going to compete with KKR, Blackstone, Macquarie and Goldman Sachs in New York and London and win the war for talent there? I don’t think so,” he said.
($1 = 1.5538 Australian dollars)
Reporting by Lewis Jackson and Scott Murdoch; Editing by Jamie Freed
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