The Australian Retirement Trust, the second largest pension fund in Australia, has announced its plans to increase its private credit allocations this year. This move comes as the fund aims to target opportunities in Europe and North America, with a goal to raise its private credit position to 2.5 per cent from the current level of just below 1.5 per cent.

According to Andrew Fisher, the head of investment strategy at the Australian Retirement Trust, the firm is strategically building its allocation in a disciplined manner by focusing on the lower-risk, unlisted segment of the credit market. Fisher highlighted the competitive nature of the space, noting the significant presence of banks and the need to explore offshore opportunities due to the dominance of banks in Australia.

The pension fund intends to leverage a mix of external managers and its internal team to expand its exposure to the private credit asset class. This approach aligns with the fund’s strategy to diversify its portfolio and capitalize on the potential offered by private credit investments.

Earlier this year, another Australian pension fund, UniSuper, also boosted its portfolio exposure to private credit, with plans to allocate up to AUS$1 billion in the sector over the next 18 months. UniSuper, with assets under management exceeding AUS$120 billion, joins the trend of Australian pension funds seeking to enhance their private credit investments.

These developments in the Australian pension fund industry reflect a growing interest in private credit opportunities, driven by the pursuit of diversified investment strategies and attractive returns in the current market environment. As pension funds continue to explore avenues for portfolio growth and risk management, the private credit space emerges as a compelling option for long-term investment success.