Aware Super has recently opened a London office and has over the past year rapidly grown its presence in the UK and announced its first commitments. Katya Romashkan, portfolio manager infrastructure for the Australian superannuation fund, shares how the fund is planning to leave its mark in Europe.
Aware Super is branching out. The Sydney-based superannuation fund, which invests on behalf of some 1.1 million members, is seeking ways to diversify its significant private market portfolio.
At the end of last year, the fund, which manages approximately A$182bn (£91.7bn) in assets, opened its London office in a bid to increase its allocation to European assets. Initially starting with a small team of six to eight people, the London office has now expanded to a team of 19, tasked with deploying some A$10bn (£5.25bn) across Europe and the UK.
Among the team is Katya Romashkan, who has been part of Aware Super’s London office since its launch and previously spent nearly five years on the infrastructure team at LPPI, the manager of the £26bn LGPS pool LPP.
At Aware Super, she is part of the effort to expand the fund’s geographic footprint: “Australia still represents about 65% of our infrastructure portfolio and will always be an important market for us,” Romashkan explains. “But as we aim to grow our overall portfolio from A$19bn to A$25bn in the next few years, we need to look for the best investment opportunities wherever they are, which means searching globally.
Being on the ground is essential for us. Proximity to assets and managers in Europe and North America allows us to undertake due diligence and asset management more effectively.
Katya Romashkan, Aware Super
Proximity matters
At the heart of this strategy is the belief that proximity matters in private markets, Romashkan explains: “Being on the ground is essential for us. Proximity to assets and managers in Europe and North America allows us to undertake due diligence and asset management more effectively.”
Through its London office, the fund plans to invest in infrastructure, real estate, private equity, and debt through a mix of direct investments and allocations to third-party managers. “While we’ve historically relied on third-party fund managers for international investments, particularly in private equity, we’re increasingly focusing on direct investments in infrastructure and property,” she notes.
Over the past 12 months, the fund has announced its first major commitments, including a £1bn real estate partnership with Delancey and a £300m investment in Octopus Energy on the infrastructure side.
Strategic asset allocation changes
Towards the end of last year, Aware Super’s investment committee reviewed the fund’s strategic asset allocation. Despite a challenging macroeconomic backdrop, the broader strategy remains largely unchanged, Romashkan shares: “For infrastructure, the strategic asset allocation (SAA) is about 11%, while property and private equity stand at approximately 6–8% and 5–8%, respectively, depending on the option.”
“These allocations are reviewed as a percentage of total assets under management (AUM). While there may be minor fluctuations, our overall outlook on these asset classes hasn’t changed significantly. Our portfolio is well-diversified across sub-sectors and risk parameters and has performed well.”
However, she acknowledges that the rise in central bank interest rates across developed markets has led to increased investor caution. “We’ve seen some funds pause their private market activities due to macroeconomic uncertainty, but we’re very much in deployment mode,” Romashkan asserts. “Our focus is on finding the right assets with the best risk-adjusted returns for our members.”
“If you have a well-balanced infrastructure portfolio, you’ve likely performed well despite some write-downs in certain areas due to rising discount rates,” she adds.
Asset allocations at 31 December 2024
Future Saver High Growth
Future Saver Balanced
Future Saver Conservative Balanced
Valuation challenges
The past year hasn’t always been easy for infrastructure investors, Romashkan acknowledges. While infrastructure fundraising surged in 2021 and 2022, investor appetite has slowed over the past two years, according to Preqin data.
Interest rates have been a key factor driving the slowdown, she notes. “They’ve increased discount rates, leading to adjustments in valuations, particularly in super-core assets. This has made sellers more cautious and buyers more selective.”
“Some people were being opportunistic,” she adds. “We’ve seen instances where buyers put in offers to test the appetite to sell, but if sellers don’t need to sell, they won’t. It’s about maintaining price discipline on both sides.”
“Owners of high-quality assets who don’t need to sell have held back, unwilling to accept lower valuations. At the same time, buyers are exercising price discipline,” she explains. “This bid-ask spread has tempered transaction activity, but we’re still seeing good assets trade at fair prices.”
2025 outlook: beyond crowded trades
What does all this mean for 2025? While climate change remains a dominant megatrend for Aware Super, Romashkan recognises that sectors such as renewables infrastructure have become increasingly crowded.
“We’re focusing more on energy transition opportunities, particularly beyond traditional renewables,” she reveals. “Returns in traditional renewables have been compressed, so we’re exploring areas like energy storage, battery storage, and smart meters.”
“We’ve also invested in EU Networks, a pan-European dark fibre platform, which gives us exposure to the growing demand for digital infrastructure. Similarly, our investment in Switch Data Centres in the US aligns with our broader strategy of balancing digital and energy transition investments.” “We have a clear definition of what constitutes infrastructure for us, but we’re continuously evaluating emerging sectors. Transport and logistics, cold storage, and home decarbonisation are some of the areas we’re considering.”