One of Australia’s largest pension funds, Sunsuper, said it was opportunistic to take debt positions in some South European and Asian real estate markets, including with the small amount of the debt. debt it holds in the struggling China Evergrande group.
Sunsuper, which manages A $ 85 billion ($ 61.6 billion) in assets – around 10% is in real estate is willing to take more risk when its senior debt strategy does well, said Bruce Tomlinson , responsible for alternative strategies round table on real estate debt of AsianInvestorWeek of investment in private assets.
About half of the company’s real estate debt positions are in funds, the other half being non-funds through separately managed accounts or other mandates with external fund managers.
Its exposure to mortgage loans ranges from senior debt securities to equity-like positions such as non-performing loans. Its core positions mean it holds positions in mortgages in the United States and in construction finance in Australia and China, which are primarily senior debt.
Core-plus strategies include a junior mezzanine with senior loans above. These mezzanine arrangements are primarily special refinancing projects of a troubled nature, Tomlinson noted.
Tomlinson added that the company has some exposure to nonperforming loans in Spain and Italy and sometimes also buys thematic real estate loans in India, or higher risk debt in China and Korea if the right opportunities arise.
Tomlinson also explained Sunsuper’s debt positions in one of the most hotly discussed Chinese companies at the moment.
“Evergrande is exploding and a lot of people are wondering about it, like what that means for high yield real estate debt and in Hong Kong and China. We have some exposure to it, but it’s a modest part of our overall exposure to real estate debt. We have very little Evergrande directly exposed, “he said, without disclosing any amount.
Evergrande, one of China’s largest real estate developers, is also the most indebted in the world with $ 300 billion in liabilities. Its recent default sent shockwaves through the Chinese market and financial system.
Sunsuper is no stranger to other aspects of the Chinese real estate market. “We already have good exposure to Australian and Chinese construction loans and have been doing so for several years,” Tomlinson said. “We will continue with this.”
Under the merge process with QSuper To become an A $ 200 billion pension fund, Tomlinson stressed that the offer would not be a problem for his real estate strategies. The assets and liabilities of Sunsuper and QSuper will work in parallel for a period, and the funds’ strong cash flow means that their existing investment strategies will continue to work in the medium term, he explained.
“There are a lot of trillion dollar funds. So we don’t think $ 200 billion will be a problem in the medium term, ”he said.
The panel also included Toby Selman, senior real estate advisor at the New Zealand Superannuation Fund, who explained that unlike Sunsuper, his fund’s real estate portfolio is more focused on stocks than debt.
Within debt instruments, he favors syndicated loans. “We find syndicated loans to be a pretty efficient way for us as a relatively small sovereign wealth fund compared to our peers, where we can transact quite efficiently rather than being in fund structures,” Selman said. .
She recently completed several syndicated warehouse loans and some syndicated development finance projects in Europe. He is also considering direct positions in Ireland and London, Selman said.
NZ Super just posted its best annual return at 29.6%, with the fund reaching a size of $ 42 billion. Real estate investments only make up 1% of the portfolio, but Selman said as the fund grows there will be more emphasis on real estate debt.
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