November 2016
What if we told you that shopping with some of Australia’s best-known retailers might just be good for your super?
As one of the country’s largest super funds, we invest in a diverse range of unlisted (or direct) property and listed property trusts—both in Australia and internationally.
This means, as a UniSuper member, you can invest in high-quality commercial properties such as shopping centres—as well as office buildings and industrial sites—that you might not otherwise have access to.
UniSuper's Head of Property and Private Markets, Kent Robbins, explains what makes property an important asset class for UniSuper members.
How does property generate returns?
Listed vs. unlisted property—what’s the difference?
Both unlisted and listed property typically refer to investments in professionally-managed retail, commercial or industrial real estate.
Unlisted property doesn’t trade on stock markets, so prices are determined by an independent valuation process.
UniSuper's unlisted property portfolio focuses on high-quality, core real estate and is almost entirely Australia-based.
Listed property typically involve real estate investment trusts (REITs)— that are listed on a publicly traded stock exchange.
Pricing may fluctuate based on stock market demand as opposed to underlying asset valuations.
UniSuper's listed property portfolio includes Australian and internationally-listed securities.
Both listed and unlisted property investments produce returns through:
- rental income from tenants, and
- capital growth.
Because rental income is generally a significant component of property returns, returns are considered relatively stable and predictable over the long term. And as property is a real asset, it enjoys an inherent level of protection from inflation. Well-located shopping centres can also be in a position to negotiate rental increases in excess of the inflation rate.
Returns from listed property are linked to movements in the value of the securities and income generated by property management companies.
What’s the benefit of investing in property through UniSuper?
Super is a long-term investment for most people.
While it’s seen a dip in recent months, our Listed Property option has delivered a compound annual return of over 15% in the five years to September 2016*. And, our unlisted property investments continue to perform strongly.
Over the long term, retail property in particular has historically delivered strong real and absolute returns, with the lowest volatility of all commercial property types*.
As a large institutional investor—with an in-house investment team—we have an advantage over many smaller investors in that we have:
- the scale and experience to bid for large, high-quality assets that may not be offered to other investors, and
- a governance framework that allows us to make decisions and close deals quickly.
For many years now, we’ve had a strong focus on retail property investments. Our unlisted and listed portfolio provides members with exposure to Australia’s best shopping centres.
One of our investments owns Karrinyup Shopping Centre outright, an unlisted asset in Western Australia.
It's one of the country’s highest-quality shopping centres and—along with the other investments which also own shopping centres —is what we refer to as one of our 'fortress' assets.
*Past performance doesn't indicate future performance.
What’s a 'fortress' asset?
We consider fortress assets to be those that are relatively scarce with strong market positions. They tend to carry a lower risk of permanent loss of capital and generate stable, long-term cash flows, making them a natural fit for super funds like UniSuper.
For this reason, many of our investment options have exposure to fortress assets. The Defined Benefit Division’s portfolio is also dominated by large investments in fortress-style property and infrastructure assets.
Some other recognisable ‘fortress' assets’ in our portfolio include the entities which own or operate Sydney, Brisbane and Adelaide airports, the Victorian Comprehensive Cancer Centre and Transurban (toll roads).
Which UniSuper investment options have exposure to property?
All of our Pre-Mixed options have varying levels of exposure to property. Our Listed Property option invests in a diversified portfolio of listed property securities. It’s one of our Sector option, designed to be combined with other options to build a diversified portfolio.
Keen to know more?
For advice about how to invest your super, contact UniSuper Advice to make an appointment with one of our team.
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