In a statement on Monday, US-based asset manager Nuveen announced that four Australian superannuation funds had invested US$190 million into its US Cities Workplace strategy.
Nuveen confirmed that the funds in question included Cbus Super, Hostplus, and TWUSUPER, and a fourth unnamed fund, and that their sizeable investment would offer them access to “diversification benefits” of investing in sectors not readily available in the Australian market.
The US Cities Workplace strategy invests in alternative workplace assets — predominantly in the medical office, life science, technology R&D, and studio production sectors — in US cities that are believed to be positioned for demographic and structural growth.
This investment, which has seen Australian funds branching out of the country in pursuit of diversification, comes amid increasing talk about the constraints local funds face.
Namely, on a recent episode of Relative Return, the new podcast by Momentum Media, Mayflower Consulting chief executive officer Sarah Penn explained that superannuation funds don’t know what to do with the influx of funds being pushed their way.
“Our funds now, the big ones, are bigger than sovereign wealth funds in a lot of other countries. AustralianSuper, for instance, sources a lot of their investments offshore. And in fact, the area where it’s even worse is ESG,” Ms Penn said.
An urgent concern in Australia, she highlighted, is the absence of a thriving start-up culture, compounded by a general lack of community interest in high-risk ventures.
“Our start-up situation and all the money that’s been pulled out of CSIRO and other issues, we just don’t have a lot of early-stage product development that happens here anymore,” Ms Penn said.
“And then on top of that, our investment community don’t like high-risk ventures … So, there’s not enough actual activity happening. And then the activity that is happening doesn’t meet the structure that you need for a big super fund to be able to invest in you.”
Commenting on its Nuveen move, John Longo, head of property at Cbus Super, said that the fund saw it as an “interesting opportunity”, and reflected on the sectors’ absence in Australia.
“We view this as an interesting opportunity that will provide exposure to core assets with growing underlying demand drivers,” Mr Longo said.
“The medical office, life science and tech research, and development space are established sectors in the US that are not generally available in Australia.
“These sectors add to our highly diversified unlisted property portfolio. Given the softer current market conditions, we expect this to provide a good entry point for long-term performance”.
Meanwhile, Andrew Kleinig, managing director and head of Australia at Nuveen, said that the firm was “thrilled” to be growing its Australian footprint and deepening relationships with local institutions.
“For us, this is the exciting start of four new partnerships with institutions looking to generate long-term income for their investees,” he said.
“Against a difficult economic background, we see fundamental opportunities in the US alternative workplace sector and look forward to sharing these with our new partners.”
The asset manager noted that the new investors represented some of Australia’s largest super funds, with Cbus Super, Hostplus, and TWUSUPER collectively managing more than $176.5 billion of retirement savings on behalf of over 2.5 million members.
Earlier this month, in announcing its five-year strategy, Cbus said that it was planning to focus on “smart partnering” rather than establishing a global footprint.
“Global expansion was an important consideration as we developed the strategy and it’s become clear that it would provide limited value at this point in time,” Kristian Fok, who was appointed acting chief executive officer of Cbus following the departure of Justin Arter, said at the time.
“We don’t need an office in an overseas city to find the right deals for members, so it’s not worth the expense and risk of setting up permanent bases. We will continue to make the most of the flexibility we have.”
Also this month, Cbus chair Wayne Swan confirmed that the fund had successfully completed its merger with EISS Super. The super fund now manages the retirement savings of over $80 billion on behalf of 900,000 members.
