Investors see private assets through a lens of universal ownership, with some unlisted investments having the dual benefits of generating good risk-adjusted returns and benefiting wider societal and economic drivers such as productivity or job growth. Investors at the Conexus Financial Private Assets Conference shared their experiences.
Damien Webb, head of income and real assets, First State Super, says universal ownership is embedded in the fund’s investment process.
“It is inevitable that the decisions we make will have a ripple effect, we all know that,” he said. “Our view is that we need to make local beta as productive and rich as possible, so in that context universal ownership is about improving beta. One way we drive returns is through beta and managing the greater productive capacity.”
Webb highlighted three examples:
“We think it is quite a good time to invest in venture capital. And if we bring that back to universal ownership then it’s about retaining talent in Australia.”
Second, First State was a big investor in the Sydney light rail. “We think public transport is key to unlocking productivity.”
And third, agriculture, where the fund has invested in sale and lease backs, playing to the themes of productivity and water scarcity – taking the water off the balance sheets of large family-owned farms, and creating opportunity for them to make the land more productive through farming of, for example, almonds.
“These are small things now but we hope they’ll become meaningful down the track,” Webb said.
Head of private equity at Hostplus, Neil Stanford, said investors need to be willing to take small stakes in new investments and funds, and Hostplus is leading that by investing in seed opportunities.
“For example, through one of our managers we have investment in peanut allergy vaccine. If that takes off, the market for that is enormous. It is a small bet, sized appropriately but we have optionality to increase. If something takes off then we scale up,” he said.
But the investors agreed that the unlisted space is “difficult”.
“But assuming we get it right, the whole thing is an evolving platform, then we’ll be a known player and go-to player. We are buying the right to be a player. If we get social housing right then it’s a huge asset class,” Webb said.
Kristian Fok, executive manager of investments at Cbus, says the fund’s members see value in real tangible investments – which is one reason the fund is attracted to real assets.
Cbus has had vast experience in private assets, and property in particular – through Cbus Property which was established 10 years ago – and has a dedicated resource to pursue innovation.
“Cbus Property has had the positive impact of creating jobs, but we have had to do that within the context of generating good returns.”
Since 2005, through Cbus Property the fund has created 50,000 direct jobs and 60,000 indirect jobs.
“The superannuation industry has done a poor job in articulating the greater benefits of what the industry is doing. Real assets is a great opportunity to talk about the greater economic benefits. If we do that then some of the noise around, for example, concessions in super, will be discussed in a greater context.”