Brighter Super has steadily lifted its exposure to key unlisted assets in a bid to navigate market uncertainty and deliver stronger long-term returns.
Chief investment officer Mark Rider said private markets align closely with Brighter Super’s long-term strategy for its more than 280,000 members.
“We continue to see private markets are a crucial component of our portfolio construction,” Rider told InvestorDaily.
“These assets provide diversification benefits, hedge against inflation, offer strong return prospects, reduce portfolio volatility, and align with the long-term focus of our members.”
Rider said Brighter Super accesses private markets through a fully outsourced investment model, relying on the rigour and expertise of external managers to oversee its unlisted assets.
“At Brighter Super we’re adhering to a robust governance framework so we can effectively manage asset valuations and liquidity risks,” Rider said.
“We have an asset manager between us and all the assets,” he said. “We have the manager managing that process in terms of looking very closely at their, clearly, their capabilities, but also their approach on valuation … So it’s an important area for the investment strategy.”
Turning to areas of the market the fund is increasingly constructive on, he highlighted infrastructure as a standout opportunity.
“Strategically, we’ve been increasing in infrastructure, and we see it as particularly attractive due to its sort of strong forward-looking returns, diversification benefits, the inflation hedging properties it has,” the CIO said.
He also pointed to compelling opportunities emerging across the energy transition and the broader digital infrastructure thematic, while noting that recent declines in commercial property values have created favourable conditions for long-term investors.
“Commercial property prices, we believe, are around the bottom now, and we’re looking to acquire undervalued assets opportunistically across the asset class, as we further build out our industrial exposure,” he said.
A key focus within this strategy is the fund’s increasing allocation to assets in its home state.
Last year, Brighter Super committed to investing a further $500 million in Queensland across sectors such as infrastructure, agriculture and housing. In December, the fund awarded the first tranche of that commitment, handing Barings a $100 million mandate to acquire real estate assets across the state.
Rider said the fund is also deliberately reducing its exposure to listed assets, including equities and listed property, in favour of more strategic allocations to unlisted sectors.
“We’ve been attempting to pull back, I suppose, the listed asset exposure in the portfolio, and move more into unlisted assets,” he said.
“Compared to most of our peers – a lot of the major industry funds – we’ve probably got less unlisted assets from the mergers that we’ve done. The merger with the Suncorp wealth business back a few years ago saw, once we combined the funds, an injection of liquidity.
“So we’re sort of just trying to make the portfolio more resilient [with] a little bit less listed equities and listed real assets, and actually investing at the margin, particularly infrastructure and property.”
In a previous conversation with InvestorDaily, Rider said the mergers with Energy Super in 2021 and Suncorp Super in 2022 had provided the scale needed to pursue more targeted opportunities.
“We’ve got airport exposure, transport exposure, energy exposure – we’ve got pipelines around the world. What we’re looking to do now, at the margins, is try and move the portfolio towards those areas where we’re assessing there will be superior opportunities,” he said at the time.
These moves come as regulators sharpen their focus on risk management in private markets. In February, ASIC released a discussion paper raising questions about risk management practices across the superannuation industry.
The regulator’s paper highlighted concerns around opacity, conflicts of interest, valuation, liquidity and governance in private markets, but much of the focus has been put on private credit – which the corporate regulator said could be the source of the next financial crisis.
Funds have increasingly defended private markets, particularly private credit, as a crucial component of their investment strategies.
Most recently, in its submission to ASIC, super fund HESTA argued that the success of private markets plays a crucial role in economic growth, both directly – through value and job creation – and indirectly, by fostering innovation, spreading value, and driving technological advancements that benefit the broader economy.
“Private markets are particularly well-suited to fostering investment in real estate and infrastructure where investments are capital-intensive and provide a natural hedge against market volatility and inflation due to their stable cash flows, inflation-linked revenues, long-term nature and tangible asset value,” the fund said.
“Private markets are also ideal for new and emerging companies where large upfront capital investment is needed to develop and pioneer new technologies or groundbreaking ideas.”
For its part, Brighter Super applies a rigorous assessment of external managers – scrutinising both their expertise and valuation processes – to ensure disciplined and safeguarded access to private markets.
