How Australia Pension Funds are Becoming Global Force

When Brookfield Asset Management offered to buy Australian energy utility Origin Energy Ltd., opposition appeared from an unlikely quarter. Australia’s biggest pension fund, AustralianSuper, moved to block the Canadian investment giant’s A$19.4 billion ($12.4 billion) bid, saying it undervalued a business that will be key to the country’s green energy transition. Australian pension funds used to be relatively passive players that rarely sought to change the course of events at the businesses they invested in. AustralianSuper’s activist pivot is a sign that the fast-growing industry is ready to flex its new muscles in global finance.

Australia’s pension system has the fifth-largest retirement savings pool in the world, at A$3.5 trillion, and it’s growing faster than in any other country. There has been a wave of mergers and some larger funds have gobbled up smaller, under-performing rivals, giving them more clout. AustralianSuper’s move against an Origin takeover is being seen as a turning point. While the country’s pension funds have occasionally taken stands on controversial issues, such as Rio Tinto Plc’s destruction of a sacred Indigenous site in 2020, they’ve not tended to throw their weight around in deal situations, even when they had direct stakes in the companies involved. AustralianSuper did team up with local buyout firm BGH Capital against Brookfield in a 2018 bidding war for a local hospital operator. But the Origin battle is much higher profile and there’s more money at stake. Keeping its Origin stake would help AustralianSuper to meet a commitment to net-zero carbon emissions across its investment portfolio by 2050.