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AustralianSuper to invest in Asian property

Australia’s largest super fund says it will make its first allocations to the sector in Asia and Europe within five years.
AustralianSuper to invest in Asian property

AustralianSuper has said it has begun preparations for major property allocations in Asia and aims to make its first investment within five years. It is also planning to make its first investment into continental Europe in the coming months.  

“In Asia, logistics and data centres are the two sectors we really like,” the fund’s head of property Bevan Towning told AsianInvestor.

While the fund has not singled out specific countries in which to invest, Japan, South Korean, Singapore, Hong Kong and China were the most likely candidates and Investments could take in a combination of all.

The key step was identifying the right investment partner, a process which is underway, he added.

“The fund model doesn’t work for us. Ideally, we like to invest next to a strong partner as a direct investor or co-investor,” he said. While other financial institutions were favoured partners, they were not the only ones the fund considers, added Towning, pointing to the large investment in London’s King’s Cross redevelopment alongside British Land.

Entering Europe

Towning said the fund was planning to makes its first investments into continental Europe in the coming months, part of a planned multi-billion dollar investment into Europe by 2026.

“[They will come] definitely within in a year into multiple assets and sectors, probably with a number of different [investment] partners,” he said.

Towning said initially the fund’s focus would be on the leading Western European cities including Paris, Frankfurt, Berlin and Madrid, although the fund would consider Eastern Europe, too.   

In February, Damian Moloney, AustralianSuper’s head of international investments, announced the fund would allocate £23bn into Europe before 2026, including £8bn into the UK. To support the expansion, Moloney said the fund is planning to double the headcount in its London office from 50 to 100.

In August 2021, AustralianSuper head of private credit Nick Ward, said the fund was evaluating up to $2.2bn of deals in real asset debt across Europe and the US.

As in Asia, the priority when it comes to additional European allocations is finding like-minded partners, Towning said.

Up to now, the UK has provided the fund’s easiest entry point into European property, thanks to its stable legal and regulatory environments and deep pool of suitable investment partners. The fund’s property investments there comprise King’s Cross, a large co-investment with British Land and Peel Ports, the Liverpool ports group, of which it bought a 37% stake with APG and Global Infrastructure Partners (GIP) in November 2021.

But continental Europe now appealed because of the return and diversification potential, Towning said. “There are good opportunities for diversification and to expand our partner relationships [which will] offset counterparty risk.”  

As in Asia, Europe comprises a combination of different regulatory, tax and planning regimes which required work to identify specific suitable opportunities, he added.

Other Australian super funds are increasing their European property allocations. In March, the country’s second largest super fund, Aware Super, which has A$150bn AUM, said it would open a European office and that it planned to invest up to A$16bn into European and US direct infrastructure and property deals within the next three years.

Underweight property

At 5.5% of total AUM, AustralianSuper's allocation to property is lower than its peer average, estimated by a recent PwC survey to be around 9%. Within real assets the fund sees greater potential from infrastructure, in part because of its superior historical returns.

Half of AustralianSuper’s property allocation is in Australia and New Zealand; a quarter is in the UK and a quarter in the US. By 2026, AustralianSuper predicts its total AUM across the fund will increase to A$500 billion.

Despite the sharp increase in fund assets, Towning said the mix of property investments is unlikely to change over the next five years, emphasising its investment strategy was opportunity-based rather than driven by allocation targets to specific sectors.

“We don’t have a fixed geographical allocation or a specific amount of capital [for property investing],” he said.

 

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