(Bloomberg) -- One of Australia’s largest pension funds, the A$85 billion ($56.6 billion) Rest, plans to splash more on private equity investments in the next two years as it targets a 5% allocation target by 2026.

The fund has already grown its private equity holdings to 3% from 1% in 2021, chief investment officer Andrew Lill said in an interview in Sydney.

“We think it’s just an incredibly good time to be picking up assets that have a potentially a lower return multiple on the way in,” Lill said, adding that the fund is targeting “mid-market buyout, particularly in areas such as health care, rather than tech.” 

While some other Australian pensions, known locally as superannuation funds, are bolstering their exposure to private credit, Lill is cautious. Rest declined to say what its current private credit holdings are. Lill has previously said its allocation is small.

“We think that private credit is an opportunity, but we are cautious of excessive flows into the area,” Lill said. “Most of the really strong returns have potentially been made.” 

Competition in the market means that funds raised in coming years may not be as strong as funds from recent ones, he said.

“Once it becomes a ‘me too’ investment, often it’s time to start bringing your expectations and returns down,” he said, adding that he’s not predicting a crash or negative returns from the sector. 

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Pension funds including AustralianSuper, Australian Retirement Trust and Cbus have lifted their private credit exposure or are looking to allocate more. The nation’s second-largest pension fund, ART, wants to build its position to 2.5% in the coming six-to-12 months, up from just below 1.5% currently.

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AustralianSuper, the nation’s largest pension with A$330 billion under management, last month said it was seeking to boost its private equity allocation to 9% of its portfolio, from 5% currently.

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