Australian Retirement Trust primed for growth: Morningstar

Morningstar has heaped praise on Australian Retirement Trust (ART), saying it is home to a "high calibre investment leadership team playing to their strengths," but warned of key person risks.

In its review of the $305 billion-plus super fund, Morningstar has highlighted its investment team's prowess, the design and application of the investment process, and the competitive advantage its history of mergers provides.

Morningstar said chief investment officer Ian Patrick has built a strong, experienced investment team complemented by a stable lineup of strategically selected asset managers, particularly in the public markets portfolio. It said this allows the internal teams to focus more on its internalised private and real assets capabilities which "continue to prove their mettle."

However, it also noted that this brings with it key person risk "related to the investments' leadership team and especially the heads of the private and real assets."

"The global real assets and private assets (equity and debt) books are sizable with commensurate risks and management needs in terms of liquidity, valuation, and execution, thus requiring more extensive due diligence and a focus on quality partnerships. ART has invested in the teams and functions accordingly," Morningstar said.

Looking at ART overall, Morningstar said the fund is primed for growth, with an asset based that is scalable through underlying publicly listed investment capabilities that are in large part passive, keeping fees competitive.

"The private and midrisk asset books have been elemental to the fund's returns, though liquidity, risk management, and valuation practices are solid. The total portfolio approach is a center of investing excellence, with expectations high for insights from the fund's new investments resilience and planning unit," the research house added.

Additionally, it noted "solid" governance practices and said the fund "has built a competitive advantage in executing mergers with smaller industry funds, setting a firm underpin for growth in members and cash flows in the future."

In recent times, ART has merged with Alcoa of Australia Retirement Plan, AvSuper, and CBA Group Super, to name a few. It is also planning a merger with Qantas Super.

Morningstar said the focus is now on future growth, and it expects ART will manage at least $500 billion by 2030.

The research house gave ART's MySuper option a Gold Medalist Rating, as with the High Growth, Conservative, and Balanced Risk Adjusted options, while its Conservative Balanced option was handed a Silver.