Demand for Australian Super to Diversify in Europe and Asia
M&G Investments Head of Institutional Fixed Income William Nicoll says there is a growing demand from Australian superannuation funds to diversify their portfolios through increasing allocations to international markets.
M&G Investments announced the opening of its first two offices in Australia, in Sydney and Melbourne, establishing an on the ground presence in one of the largest asset management markets in the Asia Pacific region.
The firm, which invests on behalf of institutional clients across public and private assets classes, has appointed two of its senior people – Chris Andrews as Head of Business Development, Australia, based in Melbourne, and James MacKinnon as Head of Australia, Real Estate, based in Sydney.
M&G Investments says Andrew has over 30 years’ experience in the fund management industry, and will focus on the full breadth of investment capabilities for institutional clients. MacKinnon also has more than 30 years’ real estate experience in Australia and Asia Pacific, and will lead the M&G real estate business in Australia.
M&G Investments says it currently has AUD 2 billion in real estate under management in Australia and its Asia Pacific core real estate fund has 14 investments in Sydney, Melbourne and Brisbane.
According to M&G Investments Head of Institutional Fixed Income William Nicoll, there is a growing demand from superannuation funds to diversify their portfolios through increasing allocations to international markets. He says their existing Australian client base has traditionally sought international public credit expertise, and they are now seeing significant interest in European private debt and infrastructure investments, too.
“These appointments enable us to deepen our relationships with Australian institutional investors, enhance our client service and to partner with them on international opportunities,” says Nicoll.
We asked Nicoll to unpack what is driving the demand and the upside for superfunds investing in Europe and Asia now.
“We have seen a lot of change in the European debt markets over the past decade – mainly driven by changes in banking regulation – and this is going to carry on as the European markets still have a long way to go to catch up with the US markets. This means that we are seeing a number of new asset classes at different stages of maturity that can offer excellent opportunities for increasing returns or improving diversification within funds. The process is slightly different in Asia but new markets are still emerging,” says Nicoll.
In addition, Nicoll says for large, sophisticated clients, this opens up new possibilities where funds can accept the lack of liquidity in private markets to benefit from higher yields or more secure structures or both.
“This means that investors might be able, for example, to access long-dated secure cashflows from private infrastructure assets or may look to gain significantly higher returns from newer asset classes such as specialty finance. This change has been given an extra boost by the historically low yield levels available on government debt which has driven investors away from more familiar investments. Superfunds are in an excellent position to pick and choose from new markets as they become investible,” says Nicoll.
According to M&G Real Estate CEO Ng Chiang Ling, the appointments will open new investment opportunities in core real estate in Australia, as well as helping M&G to meet increasing local client demand for real estate investments in Europe and Asia.
“The appointments of James MacKinnon and Christopher Andrews are a significant step in ensuring the quality of service we provide to clients, while enhancing our asset sourcing capabilities in an international market for M&G. Investment performance and high standards of service remain the biggest determinants of success in fund management,” says Ling.
(Ed. M&G Investments is part of M&GPrudential, a savings and investment business formed in August 2017 by parent company, Prudential plc. It has £341 billion of assets under management as at 30 June 2019. M&G’s real estate business, with £33.5 billion under management, is a financial solutions provider for global real estate investors.)