‘Australia’s too small’. The $200b super fund’s global property quest

“We need to do more. We need to do more investments in all these other regions,” he told The Australian Financial Review this week.

“That’s really at the focus point right now. It’s all about becoming a truly global asset owner.”

Aware Super’s property push overseas – to Europe, Asia and the US – is one of the most ambitious so far among Australia’s biggest industry funds, such as AustralianSuper and HESTA, as they look for global real estate opportunities, much of it in Britain and Europe.

While Australia’s big super funds have long had positions in the property market, including offshore, the pressure to go global is increasing as they outgrow investment opportunities at home.

About 70 per cent of Aware Super’s $12 billion property is invested in Australian real estate, much of it into build-to-rent along with industrial real estate, with the remainder overseas.

Misev expects that balance to flip within five years, with as much of 50 per cent or even 60 per cent of the property portfolio to be invested overseas.

The offshore strategy has been carefully prepared, with a beachhead London established first, now expanded to a seven-person office. With staff on the ground, the super fund has already invested about $2 billion in the European market.

Those investments include majority control of a European serviced apartment operator, The July, and plans to grow it into a $1 billion business over the next three years.

As well, Aware Super has teamed with Delancey Real Estate in Britain to buy up under-loved office towers in London. So far, the venture has acquired three buildings worth about $1 billion in total.

Crawl, walk, run strategy

“Europe was the first cab off the rank. We wanted to make sure that we set it up the right way, not rushing,” Misev said. “We didn’t want to go into Europe, US and Asia all at the same time.

“It’s risky. You can make mistakes, so it took us a couple of years to set up London.”

It’s what Misev calls a “crawl, walk, run” strategy and Aware Super is now walking in Europe.

It’s also a model for how Aware might proceed in Asia, where it is at the “crawl” stage, running its ruler over property markets in Japan, South Korea and Singapore. The US is also a target for Aware Super, where it had previously established a smaller portfolio in industrial and in the build-to-rent sector though a tie-up with Lendlease.

Clues to what sort of real estate the super fund will look for in those global markets can be found in a second matrix it throws across its property investment strategy. Misev believes demography and technology are the big global themes, sending the super fund heavily into the residential sector, which accounts for 45 per cent of its portfolio.

Industrial assets are also on the agenda, including cold storage, self-storage and data centres, in which the super fund also has exposure through it infrastructure business.

“We have another leg to our strategy which is a bit more opportunistic, where we try to take advantage of market cycles,” Misev said.

That means that as well as buying back into the battered office sector, Aware Super is looking at retail real estate, having been a net seller over the past decade. It is applying the strategy both in Australia and overseas.

“We are gradually coming back in again. It’s very selective and very similar to the office strategy where we feel we are at the bottom of the cycle somewhere,” Misev said.

“We feel that Europe is a good hunting ground. We are trying to be early [investing into a rebound] because after this early period, the core money comes in.”

Aware Super set a target of investing close to $11 billion in Britain and continental Europe over five years after it opened its London office in late 2023, with a focus on real estate, infrastructure and private equity opportunities.