SYDNEY, July 27 (Reuters) - Australia's largest pension fund, AustralianSuper, aims to expand its in-house management of equities and infrastructure investments, but has no plans to include private equity managers, Chief Executive Ian Silk said on Thursday.
AustralianSuper plans to manage half of its A$120 billion ($96.7 billion) equities, fixed income, infrastructure and property portfolios in-house within five years, doubling from the current 23 percent, rather than relying on external managers.
"The asset class that we haven't invested in to date and is not immediately on the horizon in large-scale investing is private equity," Silk said at a Reuters Newsmaker event in Sydney, citing the difficulty of recruiting and retaining staff in that area.
AustralianSuper is a big supporter of so-called "internalization of investments" and Silk said the fund would not eventually spin off its growing internal investment arm, as some funds have done abroad.
The conundrum of whether and how pension funds can attract portfolio managers has split the industry, which manages a pool of A$2.1 trillion ($1.7 trillion) tax-advantaged retirement savings.
Silk said the move was already paying dividends, with in-house management proving they can outperform external fund managers as well as find savings on fees.
"There's no point in saving cents on the fees you pay but losing dollars on the returns," Silk said. "It's got to be a net returning outcome, not just reduced fees."
"Last year our assets went up by about 18 percent and our investment costs went up about 2 percent."
Critics of internalization say projected savings are exaggerated and point out that in Canada, one of the early adopters of internalization, funds found themselves paying high salaries in order to attract top talent. ($1 = 1.2413 Australian dollars) (Reporting by Tom Westbrook; Editing by Jacqueline Wong)