SMSF sustainable investment gets global boost
Sustainable investment is becoming increasingly important to SMSF trustees and doesn’t have to come with smaller returns, says the managing director of one of the world’s largest private equity firms.
Martin Donnelly, managing director of EQT Group, told SMSF Adviser that EQT has launched an investment strategy aimed at SMSFs to allow them to meet their sustainability ambitions.
EQT Nexus is an open-ended fund that gives Australian wholesale investors access to the same portfolio and deal flow of EQT’s institutional investors.
It invests in a range of EQT funds spanning mature buy-outs to early-stage investing across geographies and industries, with a focus on EQT’s flagship private equity and infrastructure strategies. It will also co-invest in companies alongside EQT’s funds.
Recent data has shown that Australian high-net-worth individuals hold nearly $3 trillion in investable assets. At the same time, individual investors' allocation to private markets is projected to surge by 12 per cent annually over the next decade.
Mr Donnelly said Australian wholesale investors, along with their advisers and key groups like family offices, are strategically shifting towards alternative investments as they seek diversification and superior returns.
“EQT Nexus gives exposure to a range of companies at different stages in their lifecycle and industries and access liquidity for SMSFs,” Mr Donnelly told SMSF Adviser.
“These strategies are usually for institutional investors because of their investment size and lock-up, but Nexus is now providing wholesale investors like SMSF this point of access to EQT strategies.”
He said there is a growing community of sophisticated investors in Australia and the increasing number of SMSFs being established has proved to be an interesting market.
“It is consistent with the global thematic of the democratisation of alternative assets,” he said.
“What we have witnessed is increasing demand from the SMSF sector looking to access alternative assets in an efficient manner that provides them greater diversification, enhanced returns and liquidity.”
He said one of the key opportunities for SMSFs in accessing EQT is the opportunity to make purpose-driven investments connecting to sustainability and performance.
“We do this on an industrial scale because EQT has implemented scientific-based targets across 200 investor portfolio companies which have been validated by scientific-based target initiatives,” he said.
“That creates a well-documented, articulated plan for carbon reduction in line with the Paris Agreement. EQT was the first private equity firm to commit to scientific-based targets which offers an unprecedented level of transparency when it comes to tracking progress against carbon reduction initiatives.”
Additionally, Mr Donnelly said EQT is seeing savvy investors increasingly look to ETFs to get market exposure to equities and pursue alternative assets.
“In doing so, one of the key attractions to that asset class is its resilience,” he said.
“Getting exposure to that revenue stream of infrastructure investments that are inflation-linked provides investors with significant comfort in the resilience of those portfolios.”
