Real Assets Eclipse Equities for Retirement Fund

The Australian Retirement Trust (ART), managing $300 billion in assets, is shifting its investment focus from equities to real assets like infrastructure and real estate to capitalise on changing market conditions. While this approach aims to boost member returns, it involves navigating risks tied to global economic challenges, including US inflation (Super Review).

ART experienced a robust 14% return in its default option for 2024, outperforming the median return of 11.5% for balanced funds (The Australian). Building on this momentum, the fund plans to bolster its allocation to illiquid investments such as renewable energy infrastructure, exiting from an extended period of equity-focused strategies where public markets held diminishing rewards.

Recent moves in this direction include acquiring majority ownership in Powerco, a New Zealand energy distributor, and a stake in Pattern Energy, a US renewable energy platform (Australian Retirement Trust). ART remains underweight in US and Australian equities but favors investment opportunities in Japan, citing favourable return potential in the region (Super Review).

A mid-2024 shift saw ART reclassify the portfolios of its younger members—those under 50—into high-growth pools, allocating nearly all assets to equities and alternative investments. While these high-risk paths target higher long-term returns, experts at ART acknowledge potential economic ripple effects, such as rising US inflation fuelled by policy changes, that could disrupt global markets (Super Review).

Private credit, once a focal point for ART, has lost appeal as a flood of investor interest has diluted its potential returns. With 5% of its portfolio still in private credit—double that of peer AustralianSuper—ART is now more cautious, emphasising that tactical opportunities in this space may have peaked (Australian Retirement Trust).

As the fund adjusts its portfolio toward infrastructure and real estate, it faces the challenge of balancing long-term growth with the uncertainties posed by a volatile economic landscape. Real assets, now deemed more attractive than public markets, could deliver the return stability ART seeks for its 2.4 million members (The Australian).