AustralianSuper signs UK mandate

Early evidence of capital arriving in Europe from the A$1.5 trillion Australian superannuation industry arrives as a $A60bn fund picks Henderson Global Investors for an emerging UK retail property strategy.

An expected increase in real estate investment in Europe by the $1.5 trillion Australian superannuation fund industry has been kick-started by a deal signed between AustralianSuper and Henderson Global Investors.

PERE has learned that the $AUS60 billion superannuation fund, which has more than 2 million members and 185,000 employers from various industries and professions, has selected Henderson as its investment manager for an emerging UK retail property strategy.

In a statement, Henderson, which is a listed Australian and UK fund manager with £68.9 billion of assets under management, said the mandate was part of a wider global strategy by AustralianSuper that recently announced a direct international programme aimed at significantly growing its global property investment portfolio over the next five years.

AustraliaSuper has a property portfolio of around $4.6 billion in funds and according to Henderson has an emerging strategy to invest in prime and “super prime” UK retail.

Henderson said it already had a strong reputation for the establishment and management of specialist retail funds and mandates, with around 60 percent of its £12.7 billion of real estate under management in retail in more than 170 assets across Austria, Belgium, China, France, Germany, Greece, Italy, Netherlands, Spain, Sweden and the UK.

Jack McGougan, head of property at AustralianSuper said in a statement: “Following an extensive search for an investment manager to advise on our retail focused strategy, we are confident that Henderson is the right choice. We look forward to a collaborative relationship with the Henderson team where the experience of the UK retail team will prove invaluable.”

Nick Evans, executive director, Australia, who relocated to Australia from London in 2012 when the firm decided to open an Australian office in order to develop an Australian investment management business, said the mandate was “aligned to our growth aspirations in Australia” where it is “committed to building a significant business with sophisticated investors”.

Myles White, director of property, retail, added: “Our experience investing into prime malls across UK and Europe, on behalf of a variety of clients and funds gives Henderson the ability to identify and source the best stock to meet the requirements of AustralianSuper. We look forward to leveraging off this experience in order to deliver value for AustralianSuper as they enter the UK retail market.”

Private equity real estate professionals in Europe have been predicting for some time now that Australian superannuation funds would arrive in Europe, as PERE reports in the June issue of PERE magazine.

Recently, QSuper – the scheme that administers savings for public sector workers in Queensland – reportedly agreed to buy Exchequer Court at 33 St Mary Axe in London for £82.5 million (€96 million; $124 million) from JPMorgan Asset Management.

Given that Australian real estate is in high demand not only from domestic investors but also from overseas sources, Australian superannuation schemes are looking internationally not only for diversification purposes but also to boost returns. However, diversification is the primary driver.

Those close to the market observed how some superannuation funds have been beefing up their in-house capabilities to invest offshore. For example, AustralianSuper itself just this year hired four new investment managers as part of a five-year plan to ‘internalize’ 30 percent of its funds under management. It wants to directly manage up to 30 percent of its forecasted $100 billion of assets in five years’ time. Paul Keogh, the former chief investment officer at RREEF Real Estate, was among the new additions.

The Australian superannuation fund industry is said to have $1.5 trillion of assets under management by the Association of Superannuation Funds. That pool of capital is large because of legislation that compels companies to pay 9 percent of salaries into a superannuation fund. This is known as the Super Guarantee, and there are plans in Australia to further boost the compulsory savings rate to 12 percent.