From its new and much-publicised London base, Aware Super will invest another $10 billion in the UK and Europe with a focus on property, infrastructure, and private equity, according to the fund’s head of international, Damien Webb.
“We’ve got about $17 billion in Europe already and we are looking to build on that,” Webb, who has just moved to London, tells Investment Magazine in an interview after the opening of the fund’s first offshore office.
The event which saw Aware CEO Deanne Stewart meet King Charles at a reception at Buckingham Palace and Stewart and Webb meet with Chancellor Jeremy Hunt is the start of an increased offshore investment push by the $160 billion fund, which has plans to expand to $250 billion.
“We are looking to commit another $10 billion over the foreseeable future through the London office in the areas of property, infrastructure and private equity,” says Webb, who is heading up an initial team of 15 investment professionals in the British capital.
“Having people on the ground validates our approach that it will lead to richer conversations and a fuller pipeline of opportunities to build a portfolio of high quality investments,” he says.
Living sector set to boom
Webb said investing in the build-to-rent market in the UK would be one of the focuses of the fund as it expands its European footprint.
In April this year Aware announced plans for a $900 million investment in leading UK build-to-rent company, Get Living, taking a 22 per cent stake in the business.
“The [Get Living] platform has strong ambitions to be a leading developer of the build to rent market,” he says.
“From a performance point of view, it is certainly outperforming other sectors of office and retail.”
Aware has also has a strong relationship with Dutch pension fund giant APG.
The fund took a stake in the APG-owned European apartment operator City ID in 2020 and invested with the Dutch fund in Spanish rental housing group, Vivenio in 2021.
The Dutch fund also took a 25 per cent stake in Lendlease’s retirement living business in 2021, alongside Aware, which boosted its stake to 49.9 per cent in early 2022.
Webb, who is Aware’s deputy chief investment officer as well as its head of international, says the fund currently had some 40 percent of its property portfolio in what it calls the “living sector”, which includes retirement villages and built-to-rent accommodation.
“We are going to continue to build out our living portfolio in Europe and the UK,” he says.
“We have the investments already there alongside Get Living and some others.”
“There is also a range of other areas we are looking at in the property space including cold storage and self storage.”
He said the fund was watching the UK office and retail sector for potential opportunities.
While the sectors themselves have been depressed due to the move to work from home and the rise of ecommerce, Webb believes they could throw up some investment opportunities over time.
“There has been quite a bit of dislocation in the office and retail sector. We are waiting to see what opportunities might come out of that dislocation.”
“There’s still a need for office and there’s still a need for retail. It’s about finding those opportunities amongst a range of opportunities which are not very interesting.”
Rekindling the Aus-UK relationship
Webb says the establishment of a UK office would allow the fund to develop high-level connections in the City of London and help put Australian super funds on the map as major institutions in the city.
Aware has joined the $300 billion AustralianSuper and the $215 billion industry super fund investment vehicle IFM Investors in having a London presence for its expanding in-house investment team.
The new Aware office, which was launched at the storied Mansion House in London’s ‘square mile’, comes at a time when Britain is looking to boost its links with Australia following the completion of the new Australia UK Free Trade Agreement as the country seeks new business ties in the wake of Brexit.
“The City of London and the UK Government have been very supportive of our London office and given us great access to other business leaders in the country,” Webb says.
“There is a real reinvigoration of the [Australia-UK] relationship.”
Webb says the free trade agreement with Britain was not the reason for its decision to open an office in London but said it contained helpful provisions that would be a “tailwind” for its new London presence, including making work visas for Australians easier.
The opening of the office coincided with the UK government’s Global Investment Summit which the fund’s senior leadership was able to attend along with the leaders of major investment houses such as JPMorgan chief executive, Jamie Dimon, and the chief executive of private equity investor Blackstone, Stephen Schwarzman.
Webb says there was a huge amount of interest in the UK at the moment in the success of the Australian compulsory superannuation system.
“They are re-imagining their own pension scheme, transitioning from defined benefit to defined contribution and thinking about how they can get greater investment into private markets from their pension funds.”
“Having institutional investors like AustralianSuper and IFM which have been there for a while has laid the groundwork for Aware setting up its office there.”
“There is an awareness of Australian superannuation overall there now.”
Aware, which currently manages over 30 per cent of its total investments inhouse, is looking to expand that to around 50 per cent by 2025.
But this will see more direct involvement in some asset classes such as infrastructure and property where some 70 per cent could potentially be managed in-house.
Keeping a close eye on the opportunities in Europe from the energy transition will be a key area of focus for the UK-based team.
“The energy transition is an area which is going to require trillions of dollars of further investment and the UK is a strong destination for that kind of investment,” Webb says.
“We will be looking at a range of investments which relate to the energy transition.”
“There is a very deep market which has been created around the energy transition and the opportunity for investment in offshore markets is quite deep.”
He says this is an area that Australia could learn from watching developments in the UK, Europe, and the US with the passage of the Inflation Reduction Act.
Webb says Aware, which has a stake in Australian telecommunications company, Vocus, is also interested in looking at more investments in digital infrastructure in the UK and Europe.
He says Aware is planning to double its London-based staff to 30 over time, as part of its overall strategy of boosting its total in-house investment team from a current 110 to 200.
“We want to use the new office to provide a big uplift in our capability,” he says.
“It is part of our strategy of growing to a $250 billion fund and being able to invest the portfolio appropriately, with half of it managed internally.
“We need to have people overseas.
“Now we have opened the office, it is about moving to the execution stage to realise that vision and have a strong capability uplift from our investment in the office.”