Australian pension overseeing A$75 billion adds private equity

[MELBOURNE] Mercer Superannuation Australia will add private equity to its default pension options for the first time, joining a growing number of retirement funds in embracing the strategy to diversify their holdings.

The A$75 billion (S$63 billion) pension will begin deploying capital this year and aims to bring the allocation to around 5 per cent of default options which members are automatically placed in, said its chief investment officer Graeme Miller. Most of the new money will be allocated to secondary and co-investments, he added.

“If you look at the structure of capital markets, the trend has been to stay private longer,” Miller, who joined Mercer from TelstraSuper this year, said on Tuesday (Jul 8). “More and more companies are turning their backs on public markets.”

The move is the latest in a run of private equity allocation increases among so-called superannuation funds within Australia’s A$4.1 trillion retirement system. Colonial First State is also set to deploy retirement capital into private equity for the first time this year. AustralianSuper, the largest super fund, said last week it was finalising deals with four private equity firms as part of the build-out of its own allocation.

Mercer’s shift comes as it adopts an underweight stance towards US equities after valuations became stretched following an impressive run relative to private assets, Miller said. “It has been a challenging time for private markets. Our members have been able to benefit from that return differential,” he said.

Miller said the shift was timed to take advantage of a dip in private-market activity. Secondary investments are regarded as favourable give that they typically include a discount to the underlying asset value, he added.

Private equity has faced a lull globally this year. In the first quarter, fundraising dropped 35 per cent to US$116 billion compared to the same period in 2024, partly reflecting a slowdown in deal-making and initial public offerings, according to data provider Pitchbook. BLOOMBERG