Super funds eye overseas property
Wednesday, 18 February 2015 | Stefanie Garber
As the ‘unpleasant experiences’ of the GFC begin to fade, superannuation funds are once again looking to dip their toes into international property, says LaSalle Investment Management.
Speaking in Sydney yesterday, LaSalle’s Asia Pacific head of strategic partnerships Ian Mackie said a number of Australian pension funds have been considering entering international property markets in recent years.
“We see, in our travels around Australia, that there is significantly increasing interest from Australian superannuation funds to get offshore but they are very cautious,” he said.
He suggested this wariness stemmed from “unpleasant experiences” with international property markets during the GFC but interest was once again rising.
Speaking at the same event, organised by LaSalle, head of research and strategy Paul Guest said Australian pension funds were facing tight conditions domestically.
“When you have an environment with growing pension fund allocations and a relatively small domestic market, or at least a closely held domestic market, you have two routes to follow,” he said.
He suggested super funds could choose to invest in Australian assets, following the example of Taiwan and South Africa, where “where you just keep buying domestically and bid down the yields until they are at two per cent”.
Alternatively, the funds could consider overseas markets, similar to the British and Dutch models, according to Mr Guest.
“Australian superannuation funds are going to have to make that choice in the next couple of years because they have this growing flow of allocations,” he said.
“They have an allocation to property and they have to choose where to place that.”
Mr Guest indicated that the international route may become more common for Australian super funds within the next 10 years, citing Korea as an example of how quickly the tide can change.
“It doesn’t take all that long to change. If you go back 10 years ago, Korean funds weren’t on anybody’s radar,” he said.
“Ten years later, a whole list of Korean pension funds have gone international.”