Australian Retirement Trust (ART) is looking to add Asia-based private equity managers with a view to replicating the mid-market buyouts that characterise much of its portfolio in the US and Europe.

“We’ve got a lot of Australian exposure within Asia, but we need more Asian mid-market buyout exposure,” said James Lilico, who leads the Australian superannuation fund’s PE programme, which was valued at AUD 23.2bn (USD 16.6bn) as of June 2025. “We’ve grown the team and that allows us to do more market mapping, be more targeted, and work out where we want to be.”

It is, he emphasizes, a work in progress. The team is still figuring out what that exposure should look like, debating the virtues of pan-regional versus country focused and the merits of managers in individual markets. But bandwidth is less of a restriction.

The non-domestic portion of ART’s Asia portfolio has traditionally been pan-regional with a touch of China and India: the likes of EQT, PAG, and Ascendent Capital Partners are referenced in its most recent portfolio holdings disclosure. Now, the superannuation fund can potentially go deeper.

“Before, it was easier to go with pan-Asian managers than make that country relative value call. Now, as we grow the portfolio, we see certain areas getting more developed,” said Lilico. “Places like Japan and India have become quite developed private equity markets. We can’t say it doesn’t make sense to have country allocations.”

Size matters

The major impediment is size. ART needs to make primary fund commitments of at least USD 100m – and often expects meaningful co-investment on top to reduce its overall fee exposure. Net cash inflows mean ART has been adding new managers in recent years; but the trajectory of growth means that cheque sizes must be viewed in the context of what is relevant in five years’ time.

ART is a beneficiary of broader superannuation industry consolidation, having taken on its current name in 2022 follow the merger of Sunsuper and QSuper. That created a behemoth with over 2.2m members and AUD 263bn in total assets, but M&A with smaller peers continues.

Total assets had grown to AUD 364bn as of June 2025, helped in part by the transfer of 136,000 members – from the likes of Woolworths Group, Commonwealth Bank Group, Qantas, Alcoa, and AvSuper – with plans of AUD 31.1bn over the prior 24 months. ART is Australia’s second-largest super fund and one of 10 that account for 40% of the AUD 4.4trn in industry-wide assets.

With many interests inherited through M&A, there are around 60 manager relationships in the global private equity portfolio but only 23 are considered core. Australia makes up 12% on a value basis via groups like Pacific Equity Partners (PEP), Allegro Funds, Crescent Capital Partners, and Genesis Capital. ART also has local venture capital exposure through Airtree Ventures and Square Peg Capital.

Lilico describes Australia as “one of the best parts of our portfolio,” crediting a handful of high conviction managers with delivering outstanding returns. Adding new GPs is tricky because few local players have raised funds of more than AUD 1bn and ART wouldn’t want to be more than 20% of any fund while adhering to its minimum cheque size requirement.

However, there is scope for deepening existing relationships. ART is an investor in PEP’s flagship buyout fund and the manager’s hybrid PE-infrastructure secure assets fund. When Crescent launched a growth fund last year to operate alongside its mid-cap fund, ART went into both.

Going global

Most of the superannuation fund’s international private equity exposure is in North America, chiefly funds in the USD 1bn to USD 10bn range. Names like Vista Equity Partners, Genstar Capital, Altamont Capital Partners, PSG Equity, and Waud Capital Partners feature in the portfolio holdings disclosure.

“Getting access is always challenging. If it’s someone really good, there will be a lot of demand, so we must build relationships earlier, well before the fundraise,” said Lilico. “When they know they have X amount of new allocation and are thinking about where it will go, we want them to be saying, ‘We’ve been talking to ART for a long time, and they’ve told us up front what they need.’”

This kind of proactive engagement is based on trips to North America two or three times a year by different team members as well as regular calls. ART opened a London office in 2024, but at present the only permanent private markets representatives are covering infrastructure and real estate. The private equity team is reviewing how international outposts might serve relationship building.

“There’s a framework in terms of growing these offices at the broader investment team level. We have to think about how private equity fits into that, what makes sense for the portfolio in the future,” Lilico said.

Returns across the portfolio are tracking at close to industry levels – the MSCI Global Private Equity Closed-End Fund Index hit 13.3% in 2025, having hovered just under 6% in 2024 and 2023. Weak distributions have prompted ART to reshape commitment profiles to some extent, but new managers have been added in each of the last few years.

While the superannuation fund has yet to calculate what portion of distributions are coming from continuation vehicles (CVs), it does recognise the need to move from a case-by-case approach to a more structured policy as the secondaries space continues to grow.

“We need to make sure we evolve with the market, and CVs have really ramped up in the last year or so,” Lilico observed. “We don’t always exit. In some cases, we might have a direct co-investment, so we roll that and sell out of the primary fund exposure. There are also scenarios where we think it’s a great company, we want to stay invested, so we roll everything.”

AI in focus

Artificial intelligence (AI) is also top of mind. It is factored into every new fund commitment or re-up: distinguishing teams and strategies able to leverage the technology from those liable to be hindered by it. For ART, the question isn’t whether to lean into this megatrend – Lilico cites national security and defence and infrastructure services as other key areas – but how and with whom.

“We must think what the next 10-20 years will look like. You put aside the hype or excitement around AI and ask how it might change what we are investing in and what we should be investing in,” he said. “Software has been a great place to invest for the last 10-15 years. Parts of it will still be great, we have to work out where.”

This accompanies a broader emphasis on value creation in manager selection. The tailwinds that underpinned private equity returns for a generation have shifted – and then AI adds another layer of complexity. GPs must demonstrate an ability to grow revenue and earnings organically rather than just rely on general market uplift.

The common theme is not overreacting to change. It applies to venture capital, where ART is underweight but must balance a desire for early-stage AI exposure with the reality that Silicon Valley isn’t necessarily a good fit for fee-sensitive LPs. And it applies to Asia, where a historically wider dispersion of returns and a shallower pool of proven buyout managers can translate into greater risk.

“We have to pick our spots,” said Lilico, noting that there can be no compromise on manager selection just to fill a strategic bucket. “We are doing the work to see what is possible. If we can’t commit a large amount to Asia, we will turn to other parts of the world.”