M&G Real Estate, a property investment unit of Prudential Plc, wants to raise about A$1 billion ($951 million) in the next three years from Australian pension funds as they boost allocations to foreign assets.
M&G, previously called Prupim with 17 billion pounds ($27 billion) in assets primarily in the U.K., has met with pension or superannuation funds in Australia, and will meet another asset consultant this week, said Chris Andrews, head of client relationships and marketing at the London-based manager.
Australian superannuation funds held A$1.6 trillion of assets at the end of June, with property accounting for 10 percent of the holdings, according to the Australian Prudential Regulation Authority, which didn’t distinguish between domestic and foreign-held assets in its data. The Australian All Ordinaries Index, tracking 502 of the nation’s biggest companies, had a combined market capitalization of A$1.6 trillion as of yesterday.
“A number of the funds have communicated that they feel they’re at a tipping point,” Andrews, based in Singapore, said in a telephone interview on Nov. 1. “International markets now need to be considered in a way that they haven’t been in the past because of the growth of the domestic capital and now the influx of international capital that is competing.”
M&G Real Estate is focused on Australia’s public-sector and industry-based retirement funds and wants to partner with the pensions in direct transactions, Andrews said. Among them, some of the larger funds are seeking to invest between A$100 million and A$400 million, he said.
“We could easily see ourselves managing A$1 billion on behalf of Australian funds,” he said.
M&G Real Estate said in May it formed a partnership with an Asian institutional investor to acquire a 70 percent stake in the long leases of three Tesco Plc stores with a combined market value of 237 million pounds. The deal involved the purchase of units in a Jersey Property Unit Trust, which owned a portfolio of properties currently controlled by Tesco Pension Fund and located in Beckton in London’s east, Durham and Swindon, M&G said, without naming the partner in Asia.
“A lot of the superannuation funds are going out on exploratory visits to go and see managers in the U.K., in Asia, in the U.S., to understand what the opportunity is for them to invest in those markets,” Andrews said.
The primary interest by the pensions for investments has been in the U.K., Chris Perkins, London-based head of business space, said in the same interview, adding that for the rest of Europe, people have had “question marks over the direction of the European market.”
The public-sector funds allocated 1 percent of assets to publicly traded property and 10 percent to unlisted property as at June 30, while industry-based funds allocated 3 percent to listed property and 7 percent to unlisted, according to APRA.
“We’re talking to people who are saying ’we anticipate 20 percent to 30 percent of our real estate will need to be offshore,’” Andrews said.