AustralianSuper and Churchill team up for US mid-market opportunities

Australia’s largest pension fund is aiming to triple its exposure to private credit.

AustralianSuper, Australia’s largest pension fund, has invested $250 million with Churchill Asset Management for investment in traditional senior and unitranche loans to private equity-backed mid-market companies in the US, in what the two firms describe as the beginning of a partnership. The $250 million is an initial installment, expected to grow substantially.

AustralianSuper has over $4.5 billion committed to private credit globally, just under 2.6 percent of its $175 billion portfolio. It aims to triple its exposure to the asset class going forward. The growth will entail both direct lending by its in-house team and strategic partnerships with managers such as Churchill.

Ken Kencel, president and chief executive of Churchill, said in a statement, “We believe the opportunity in US middle market senior lending continues to be very attractive, particularly given the floating rate nature of the investments, strong current income potential, significant lender protections and senior position in the capital structure.”

He added that Churchill looks forward “to helping AustralianSuper achieve its investment objectives by providing differentiated access to our directly originated, proprietary senior loan assets”.

In late August 2021, AustralianSuper opened its New York office, which was originally planned for a year earlier but stymied by covid-19-related travel restrictions.

Three months later, Private Debt Investor reported that Australia’s big banks had largely already retreated from adventurous markets, “seeking more vanilla lending,” and that this had opened new spaces up for “smaller domestic players, often funded by Australian superannuation,” levered at the fund level.

Early in 2022, AustralianSuper appointed Eloy Lindeijer to its direct investment decision making and advisory committee for UK and European investments as part of a push to scale up its activity in private credit.

More recently, Alistair Barker, the head of total portfolio management at AustralianSuper, told trade publication IPE Real Assets, “Investments in private-market assets provide ballast to the return of a diversified portfolio. The use of unlisted assets to diversify returns through market cycles can provide some stability to the portfolio during listed share-market volatility, potentially resulting in greater return stability for members.”

Churchill is the private capital specialist of Nuveen, which is TIAA’s asset manager. The firm invests in mid-market senior loans across economic cycles, lending more than $14 billion annually.