QSuper, Australian Pension Fund, Plans to Invest in U.S. CRE


(Bloomberg)—Australia’s second-largest pension fund is betting on U.S. real estate while avoiding overpriced infrastructure assets as it chases returns in the face of a fragile global economy.

QSuper wants to buy more office buildings and apartment developments in the U.S. after purchasing Chase Tower in Texas in August, Chief Investment Officer Charles Woodhouse said in an interview. The A$110 billion ($76 billion) fund a large chunk of its assets in cash, giving it more firepower than many other funds to write big checks when it sees opportunities, he said.

“We’ve got several other transactions in the U.S. that we’re looking at very closely right now,” Woodhouse said, without elaborating. “The more of these opportunities that we can find in the unlisted asset classes that generate these high single-digit, low double-digit returns, the better.”

Dry Powder

Pension funds from Sydney to Amsterdam have been warning of dwindling returns as the U.S.-China trade war weighs on the global economy. In the hunt for yield, many Australian funds are tapping ever more exotic ways to meet minimum return targets of 3%-3.5% above inflation, putting money into private equity, venture capital and snapping up niche infrastructure assets like land title registers.

QSuper is eschewing taking on more risk and sees many infrastructure assets as too-richly priced to meet its return targets, Woodhouse said. It also continues to stay away from Chinese stocks and bonds because of concerns around governance and transparency, even as the world’s second-largest economy takes a greater share in global indexes, he said.

The Brisbane-based fund is second only in size to the A$170 billion AustralianSuper, and its balanced investment option returned 10.4% in the year ended Aug. 31, the best performer, according to Lonsec Group.

Unlike AustralianSuper and some other pension funds, it’s not bringing more investment capability in-house, and relies instead on “very strong strategic partnerships” and large mandates with firms including QIC Ltd. and Partners Group for infrastructure and private equity.

“We are quite cautious about making the assumption that we could bring talent of that quality and capability into a super fund based in Brisbane,” Woodhouse said. “It doesn’t mean it couldn’t be done, but given that we can partner with those good investment managers and those relationships are still quite productive for us, we don’t need to take that step.”

To contact the reporter on this story: Matthew Burgess in Melbourne at [email protected].

To contact the editors responsible for this story: Edward Johnson at [email protected]

Peter Vercoe

© 2019 Bloomberg L.P.

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