Last month, 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. QSuper is being advised by The Townsend Group, reports noted.
Mark Evans, London-based head of CBRE’s equity placement business, was one of the first to highlight the trend when speaking with PERE in March. He said plenty of international capital was seeking to marry up with ‘best-in-class’ real estate operators and managers, venturing that the group included Australian superannuation funds. Three months later and PERE sources are suggesting that one major manager is expected to announce imminently a mandate on behalf of an Australian superannuation fund to invest in certain parts of Europe, further underlining the move of Aussie capital to European shores.
Despite its recent deal, QSuper is not perceived to be leading the way in this march. Rather, experts noted that it is a sovereign wealth fund, Australia’s Future Fund, that superannuation schemes are following because it has been investing in Europe for several years. In addition, a recent transaction has just given them added confidence.
Last month, Future Fund announced a successful exit of a 33.3 percent stake in a shopping centre called The Bullring in Birmingham, England. Future Fund sold its interest to the Canada Pension Plan Investment Board and UK REIT Hammerson for £307 million, having bought the stake for around £200 million in 2009.
Nick Evans, who is based in the Sydney office of Henderson Global Investors, said he believes that transaction has increased confidence, and he confirmed that some superannuation schemes were “continuing to explore” offshore investment strategies, with some having more developed plans than others.
Evans pointed out that Australia has the fourth largest savings pool in the world, and it is growing. Total assets ‘cracked’ the $1.5 trillion level for the first time in February, according to 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.
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.
Indeed, those close to the market observe how some superannuation funds have been beefing up their in-house capabilities to invest offshore. For example, AustralianSuper just this year hired four new investment managers as part of a five-year plan to ‘internalize’ 30 percent of its funds under management. Paul
Keogh, the former chief investment officer at RREEF Real Estate, was among the new additions.
Given all the signs, it shouldn’t be long now before Europe reaps the benefits of an Aussie shopping spree.