Australian superannuation funds are expected to prioritise Europe over the US for their incremental investment, including real assets, as the US becomes a riskier destination due to unpredictable policies.
Greg Combet, chairman of Future Fund, highlighted the increased risk in the US market due to Donald Trump’s tax bill, specifically section 899 in a major speech on 17 July, saying the section has the potential to “dramatically escalate tax rates for Australian institutional investors like the Future Fund”.
Combined with other policies and dynamics, Combet says the US will receive “a smaller share of capital flows going forward” from global investors such as the Future Fund.
Australia funds, AustralianSuper, Aware Super, REST and Australian Retirement Trust, have already allocated capital to Europe.
Most recently, Hesta mandated US manager Heitman, to seek out European investment opportunities in self-storage, student housing, residential rental and healthcare.
Hesta head of portfolio management, Jeff Brunton, told IPE Real Assets: “The decision to invest in European alternative property types is driven by attractive risk adjusted returns, our extensive research in the sector and our focus on diversifying exposures in emerging opportunities.”
He says currently, Hesta’s balanced growth option, its default investment option where most members have their super invested, has a strategic allocation of 6% to real estate with a little over a third of this deployed offshore.
Heitman also manages super money for other Australian funds in Europe. The manager sourced Norwegian housing portfolios for Australian Retirement Trust (ART). Heitman is managing ART’s Bo Coliving business, and a second portfolio, known as Steinman Studentby, which was acquired in 2023.
Another industry fund, Rest Super, has committed €200m in two tranches to the Fidelity Real Estate Logistics Impact Climate Solutions Fund which invests in logistics properties in Europe.
The nation’s largest super fund, AustralianSuper, has around A$10bn (€5.6bn) worth of assets, mostly in the UK. Early this year, it acquired a A$1.4bn European industrial and logistics portfolio from Oxford Properties, giving it a pan-European footprint across 76 assets.
Aware Super has also committed A$10bn to European investments and appointed Mathieu Elshout, formerly of Patrizia, to lead its property team there – clearly intending to build up its European portfolio.
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