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Superannuation Schemes Investing in Real Estate

by Carla Henry

  • 21 Mar 2012
  • RE

Superannuation schemes invest across the real estate spectrum, allocating directly as well as through public and private funds. These investors typically allocate the greatest proportion of assets under management to real estate of all investor groups. Preqin is currently tracking 91 active superannuation schemes investing in the real estate asset class, 86% of which are investing in private real estate funds. Collectively, these 91 investors manage more than USD 661.5 billion in total assets. 26% of superannuation schemes have less than $1bn in total assets, 45% have between $1-5bn, 18% have between $5-20bn in assets under management, with the remaining 11% managing assets of over $20bn. An example of such a larger investor is the Canada-based OSFI, which is currently managing assets of over CAD 121bn.  

As of March 2012, the average real estate allocation of these institutions was 9.8% of total assets; however the average target allocation to real estate was 11%. 24% of superannuation schemes have less than $100mn allocated to property, 43% have between $100-500mn invested, and 15% have real estate portfolios worth between $500-999mn. 18% of superannuation schemes have real estate portfolios valued at over $1bn. An example of a superannuation scheme with a significant real estate allocation is AustralianSuper. Its AUD 4.7bn real estate portfolio is split 99% to private real estate funds and 1% to direct real estate.

90% of superannuation schemes are based in Australia, 4% in Canada, 2% in Ireland, 2% in New Zealand, and the remaining 2% split equally between Kenya and Papua New Guinea. These investors seek opportunities in a range of geographic regions; 26% of superannuation schemes seek investment opportunities in North America, 71% target Australasian assets, 28% invest in Europe, and 24% are targeting Asian real estate. 31% of superannuation schemes will invest on a global scale. MTAA Superannuation Fund is an example of an investor targeting investments on a global basis, including properties in Europe, Asia, and US markets. The Australian investor targets a diversified mix of properties and has a preference for opportunistic, value added, and debt vehicles.

Superannuation schemes have a particular preference for vehicles with core, value added, and opportunistic strategies, with 90% interested in core funds, 49% having an appetite for value added vehicles, and 48% having a preference for opportunistic funds. Emergency Services & State Super is an example of a superannuation scheme with a preference for core, opportunistic, and value added funds. The AUD 19.8 billion investor has a 7.7% allocation to real estate, which is split between listed real estate and private real estate funds.

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