Aussie Pension Expands Into Commercial Loans

Some banks are being more careful about lending to businesses — but down under, one pension fund is looking to fill the void.

The Australian pension fund Host-Plus Pty Ltd. says it will expand into lending to companies as it looks for strong returns in places other than equities.

The pension fund manages $16 billion USD for about a million Australians in the hospitality industry.

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The fund will search for companies that are “distressed not because they themselves were distressed, but because their bankers were,” he said in a telephone interview from Melbourne. “These are perfectly well-operating companies, so the question is how can other pools of capital outside the banking system help.”

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Host-Plus, which primarily serves workers in Australia’s hospitality industry, dumped all of its sovereign bond investments six years ago when it opted to pump more money into illiquid assets such as infrastructure and private equity.

The pension manager’s “MySuper” strategy, its default retirement savings option for members, has returned 9.4 percent during the 12 months to August, ahead of an industry average of 7.1 percent. The firm has the second best performance in that category, according to Morningstar Inc. data.

Sicilia said he has no plans to re-enter the sovereign bond market any time soon as the majority of Host-Plus’s members are young Australians who don’t need to make frequent redemptions.

“Bonds provide downside protection from equity markets, but we get our downside protection from unlisted assets,” he said.