Aussie super looks overseas for growth as it beefs up on property
Giant wealth manager Australian Super is scouring overseas property markets for growth as it looks to double its real estate holdings in the next three to five years.
The country’s largest super fund – with 2.4 million members and $233 billion invested – is looking to global markets it views as more “inefficient” to bolster its real estate portfolio.
“More than likely, a lot of our growth will come from offshore rather than onshore because the opportunity set is that much bigger,” the super fund’s head of property Bevan Towning said.
Australian Super does not assign “defined weightings to geographies,” he said, but is mainly looking to the US and UK for growth.
“There are more inefficiencies in some of the global property markets that just don’t exist in Australia,” he said.
“Australia is a very mature and efficient market for property with more limited opportunities to generate alpha or outperformance [returns]. Equally, global markets offer more diverse sectoral opportunities to achieve both scale and outperformance.”
The intended spike in investment will double the fund’s current property holdings, split 63/37 between Australia and offshore, from $10.7 billion to roughly $20 billion.
Locally Australian Super is riding the industrial property investment wave, but doing so with a different investment mandate.
Mr Towning, who joined Australian Super three years ago with the intent of overhauling and re-weighting the fund’s global unlisted property portfolio, has been busy scoping several big industrial deals, including the Wiri estate near Auckland worth $615 million and has tipped $774 million into a joint venture at Moorebank Logistics Park in Sydney.
More recently, a consortium led by Australian Super and logistics property giant LOGOS scooped up prime industrial land at Mascot, near Sydney Airport, after Qantas offered it for sale.
That $802 million deal included about 13.8 hectares and the leaseback of Qantas’ distribution centre, with Australian Super taking a hands-on approach to steering the development with LOGOS.
Mr Towning said he avoids passive investing and has internalised management of all the fund’s assets.
It’s a philosophy all of Australian Super’s investment teams follow, and an approach the fund maintains delivered savings of $200 million last year and $750 million since inception in 2013.
“We won’t invest in [other managed] funds, we won’t be a passive investor,” he said. “We take a much more hands on role.”
It reduces members’ fees and provides bigger returns, he maintains. The approach is also likely to yield greater development dividends, and conversely expose the fund to more risk, as it constructs and leases out new buildings and estates.
“It has worked well for our equities team both domestically and internationally. It’s worked for the infrastructure team. We think it’ll work for us,” he said.
Mr Towning said the fund is exploring alternative asset classes like life sciences, health care, education and data centres, but is yet to invest at scale and will more likely leap into the sector outside of Australia. “You need scale to really get outsized returns,” he said.
He is also more upbeat than many others about the prospects of shopping malls facing online challenges.
“Retailers have realised that they also need a physical store presence to support their online retailing. We haven’t quite hit equilibrium, but I don’t think we’re far off that point,” he said.
Sectoral changes are taking place and investors need be ahead of those changes.
“We’ve been quite deliberate around our strategy. We’ve got a very thematic-driven strategy around digitisation and everything that means for property, from e-commerce to logistics to working,” he said.
