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Hostplus dumps single sector property, infrastructure funds

By Charbel Kadib
3 minute read

The superannuation trustee has withdrawn the funds amid concerns over the outlook for the commercial property market.

Hostplus has told members it will no longer offer its single sector Property and Infrastructure investment options from 1 October 2023.

In a “Significant Event Notice” (SEN) issued to members last Wednesday (7 June), Hostplus said the decision followed a review in which it considered the “appropriate management of investment risk, costs, complexity, asset allocation, rebalancing and liquidity”.

“Taking these considerations into account, we believe withdrawing these options, while at the same time introducing a broader suite of new pre-mixed options, is appropriate and in members’ best financial interests,” the fund noted.

“Members who wish to continue to invest in the property and infrastructure asset classes can continue to do so by investing in listed property and/or infrastructure assets on the Australian Stock Exchange (ASX) or Exchange Traded Funds (ETFs), via our Choiceplus option.”

In a separate FAQ note, the specific considerations cited by Hostplus included:

  • the increasing complexity and cost of running the Property and Infrastructure options as standalone options;
  • how best to manage the asset mix and cash flows of Hostplus’ overall investments; and
  • ensuring the super fund meet best-practice investment governance standards.

“We believe withdrawing these options, while expanding our line-up of pre-mixed options, is in the best financial interests of our members,” the super fund added.

Hostplus’ decision comes amid mounting concerns over the outlook for the commercial property market.

Commercial property returns have been hit by aggressive monetary policy tightening from the world’s central banks, with Australia’s Reserve Bank actioning a cumulative 400 bps in hikes in just over a year.

The impact of higher interest rates has been compounded by subdued demand for retail and office space off the back of the rise in online shopping activity and the shift to remote work during the COVID-19 pandemic.

These headwinds have been of particular concern in the United States, where regional banks are highly exposed to the sector.

Approximately $3 trillion in commercial real estate loans (AU$4.5 trillion), with smaller, regional, banks bearing the lion’s share of this debt burden on their balance sheets (US$2 trillion/AU$3 trillion).

According to AMP Capital chief economist Shane Oliver, there is more pain to come for the commercial property space, with recent weakness a prelude to “rougher times ahead” for commercial property.

Mr Oliver said deteriorating macroeconomic conditions, along with entrenched structural changes across the retail and office property market would weigh on demand.

Hostplus stressed its decision forms part of a broader strategy aimed at expanding its overall offering, with the super fund also launching six new pre-mixed investment options.

New options include High Growth, Defensive, Indexed High Growth, Indexed Defensive, Socially Responsible Investment (SRI) – High Growth, and Socially Responsible Investment (SRI) – Defensive.

“Collectively, these new options will provide you with an increased range of investment choices across a broader risk/return range to assist in meeting your retirement savings objectives and preferences,” Hostplus told investors.