Property plays an important role in our portfolio. As of 31 December 2021 we have over $12 billion invested in property1, locally in Australia and internationally.
As a leading global investor property plays an important role in our diversified portfolio. It can often ride out the highs and lows of an economic cycle and provide steady returns over the long term. Experienced long-term investors such as AustralianSuper expect periods of volatility from time to time. Our investment team use strategies like portfolio diversification to manage the markets ups and downs. This diversification includes adding asset classes like property to the portfolio.
Several of our PreMixed investment options include an allocation to direct property. For example, High Growth, Balanced, Socially Aware, Conservative Balanced and Stable options have investments in direct property.
What is direct property?
Direct property refers to investing in (mostly) large scale property assets. This may include (but is not limited to):
- Shopping centres and retail buildings
- Office buildings
- Residential property
- Industrial warehouses and logistics centres
Large scale property investments can deliver returns in the same way a smaller, personal investment property would. For example, through rental incomes and capital growth (if the property increases in value over time).
Careful management of property investments can also increase the value of the asset and potentially generate a higher income. For example, carrying out renovations could lead to higher rental returns from tenants.
Direct property is an unlisted asset. This means it’s not listed on an exchange like the ASX. This results in property assets having less liquidity than other assets such as listed shares and can take longer to sell. Our aim with this type of (illiquid) investment is to earn a return premium over the long-term. This fits well with our overall investment strategy - AustralianSuper is a long-term investor, generating returns for members over the course of their working lives and in their retirement.
Long-term investments benefit you before and after retirement
For people starting work at 20 years of age, their super will be building for over 40 years. Members already in retirement with their super in an account-based pension will often need to generate income over several decades. If you retire at 67, you may be living off your super for over 20 years, so long-term investment strategies are equally important in retirement.
The longer-term investment horizon of direct property makes it an asset class that works well for superannuation.
How AustralianSuper invests in direct property
We invest in property domestically and internationally. About 60% of the portfolio is in Australian property, with the remaining investments in the UK and the United States2.
To align with our long-term investment focus we look for opportunities where we can use our investment expertise to deploy capital over several years. We look to invest in large-scale, multi-stage property assets that may provide growth well into the future.
Sourcing additional global investment opportunities is a core focus for the Fund. To make sure we continue to grow our global assets we have investment teams in our London and New York offices. These international teams provide an on-the-ground presence to build relationships and find new investment opportunities in overseas markets.
We also monitor the trends that impact the properties in our portfolio. The pandemic downturn in 2020 has had an impact on the value of property. Each type of property has responded differently to the downturn and the economic recovery. Property sectors heavily reliant on travel, student housing or communal interaction have been negatively impacted, while industrial properties have benefited from the increase in e-commerce. These insights help shape our investment choices.
Working with expert partners to secure long-term investments for members
We leverage the expertise of some investment partners in the property space. This expertise helps the Fund access unique investment opportunities and explore new markets.
One example of this is the work we have done with LOGOS, a specialist in developing industrial property. This partnership has enabled us to invest in a large-scale Sydney logistics development site, close to Sydney Airport. The 13.8-hectare site provides opportunities for redevelopment into a state-of-the art mix of logistics and office facilities. Investing alongside high-quality partners aligns our internal expertise with the development management services of our partners to enhance properties and pursue additional returns for members.
Digitisation and its effect on e-commerce and logistics is a theme that informs our investment strategy. One example is a recent investment in the Moorebank Logistics Park in south-western Sydney. This development opportunity joins two state-of-the-art technology enabled intermodal facilities, one connecting directly to Port Botany supporting import-export freight and the other servicing the interstate rail network. The site has the capacity to develop up to 850,000 square metres of warehouse space. The Moorebank Logistics Park is a high-quality asset with great potential that fits in with our long-term property strategy.
Looking ahead to the future
Economic recovery brings new trends in the way the people live and work. The increase in e-commerce supports growth for industrial properties. As people return to work, there is more demand for comfortable modern office facilities. Property development opportunities that combine modern ways of living and working could provide significant growth potential for the Fund’s property portfolio over many years. These types of investments can help us support members in achieving their best financial position in retirement.