Joe Hockey’s proposal on housing is politically popular and the industry shouldn’t “kid itself” about this warned Nick Sherry, senior advisor of superannuation and pensions at Citi and former superannuation minister.
One of the few asset classes in Australia that has not been commoditised by the funds management industry is residential housing, and if funds didn’t address it politicians would, said Garry Weaven, chair of IFM Investors and bank ME.
Alex Dunnin, executive director of research and compliance at the Rainmaker Group, flipped the perspective by saying that if the industry wanted to get government’s, communities’ and young people’s attention the issue of housing needed to be tackled, and if it was, super funds would “run the table”.
He pointed out that UK pension funds collectively had put about $30 billion in residential housing investment projects and that doesn’t happen in Australia.
“Alan Kholer did some analysis of investment returns. Over the past several years the average default super fund has pulled in 6 per cent per annum, after fees and taxes. That is exactly what the housing index has returned over ten years, so investing in housing is actually really good investment, subject to tax issues,” Dunnin said.
Weaven suggested shared equity with home owners as a possible way forward, which would address the problem of residential property units being too small, but highlighted the need for collective research in this area between funds, funds managers and banks.
Another avenue, proposed by Sherry, was investing in social housing as the management model being developed had some promise.
The investment in social housing dovetailed with another aspect of the debate – the widening view of fiduciary responsibility.
Dr Rosemary Kelly, trustee director at First State Super, summed up this evolved view of fiduciary responsibility as a question: “What sort of society are our members retiring into and how can we improve that?