The $330 billion Australian Retirement Trust (ART) plans to increase its strategic asset allocation to infrastructure and tilt its equities exposure towards the international market across its most popular investment options from July 1.
It follows an overhaul of its default Lifecycle strategy and investment options a year earlier, which was aimed at boosting returns for disengaged members in the wake of the merger between QSuper and Sunsuper.
While the proposed portfolio changes have been in motion for several months, the geopolitical turmoil that was unleashed by the Trump administration’s Liberation Day announcement in April served to reinforce the fund’s views. While President Trump quickly wound back most of his proposed tariffs, prompting equity markets to regain the bulk of their steep losses, his approach has undermined the long-standing investment backdrop of globalisation and secular disinflation.
“The recent updates to our strategic asset allocations respond to a long-term outlook that anticipates potential for volatility in growth and an inflation-prone global environment,” an ART spokesperson said.
The latest changes affect eight of its 15 investment options, including the High Growth Pool, which sits within the fund’s default Lifecycle strategy and accounts for the bulk of its 2.4 million members.
“For the High Growth option, we’ve modestly increased exposure to global equities and infrastructure to enhance long-term resilience and inflation protection. This is balanced by reductions in fixed income and private credit, reflecting evolving macroeconomic conditions and capital market dynamics.”
Its international shares allocation will increase by 75 basis points to 33.25 per cent, while Australian shares will be reduced by 25 basis points to 32.25 per cent. The tilt is driven by the fund’s size and predicted cashflows relative to the size of the Australian share market.
“While we remain committed to supporting Australian companies and are growing our domestic investments, the scale of the fund means that our exposure to international investments will expand at a relatively faster rate,” the spokesperson said.
Within that allocation, ART continues to be marginally underweight US equities, where valuation concerns continue to fester.
Private equity and private credit allocations will both be reduced by 50 basis points to 7.5 per cent and 2.5 per cent respectively. Meanwhile, infrastructure and unlisted property allocations will be increased by 50 basis points each to 13.5 per cent and 8 per cent respectively. Fixed income falls by 50 basis points to 1 per cent.
It is understood that the shift has been driven by greater expected opportunities in infrastructure rather than a negative call on the private credit market, which has exploded in growth in recent years prompting concern among regulators.
ART’s High Growth Pool held direct infrastructure stakes in SA electricity transmission network, ElectraNet (3 per cent), Heathrow Airport (3 per cent), and Perth Airport (1 per cent) at December 31, 2024. The fund also has exposure to next generation digital assets such as data centres, as well as motor and land registries.
“We’ve increased infrastructure allocations across all diversified options as this asset class plays a key role in weathering economic ups and downs,” the spokesperson said.
The High Growth Pool accounted for about one-fifth ($63.9 billion) of ART’s total assets at the end of last year. From age 50, members are gradually transferred from this High Growth Pool to the lower-risk Balanced Pool and Cash Pool within the Lifecycle default.
“The Balanced and Conservative options have similarly shifted towards growth-oriented assets like equities and infrastructure, supported by a more flexible asset range and a dynamic allocation process,” according to the spokesperson.
The fund’s Balanced Pool will now have greater capacity to react to equity market changes. Australian and international equities will each account for 10-45 per cent of the Balanced Pool portfolio from 20-50 per cent.
The overall changes in the Balanced Pool – which held $24.2 billion in assets at the end of last year – are similar to the High Growth Pool but more pronounced.
International equities lift 75 basis point to 27.25 per cent. Australian equities fall 25 basis points to 25.5 per cent. Infrastructure is boosted by 100 basis points to 13.5 per cent, while fixed income and private credit are cut by 100 basis points to 15.25 per cent and 50 basis points to 2 per cent respectively.
While the Balanced Pool’s overall growth allocation increases by 75 basis points to 71 per cent, the Standard Risk Measure (which estimates the number of negative years in every 20 years) falls from “high” to “medium to high”. The decline is understood to be driven by a higher risk-free rate.
Meanwhile, the fund has also made changes to its sustainable investments. It will no longer seek certification from the Responsible Investment Association Australasia (RIAA) under its RI certification program for its Socially Conscious Balanced option. The fund remains a member of RIAA.
