NZ institutional investors remain well underweight property compared to Australian counterparts, a new study by commercial real estate specialist, CBRE, has found.
The CBRE report published last week shows aggregate NZ Superannuation Fund (NZS) and KiwiSaver property allocations hover around 5 per cent, a level “considerably lower than some other markets”.
By contrast, the NZ$3.7 trillion Australian superannuation regime has about 7.5 per cent of total assets in real estate including 4.8 per cent in direct property, the CBRE study says.
KiwiSaver schemes, in particular, remain property-averse with just 4.7 per cent overall in the asset class and less than 1 per cent in unlisted variants.
While the-now $75 billion plus NZS has increased its real estate holdings to about 5.4 per cent in recent years with a strong tilt (3.9 per cent) to direct investments, the sovereign wealth fund is still well below the Australian super benchmark weight.
Both NZS and the KiwiSaver market have also seen significant volatility in property exposure over the 10 years to the end of 2023 during a period where Australian super allocations held more-r-less steady.
In 2013, for example, KiwiSaver schemes reported aggregate real estate holdings of about 7.5 per cent before dropping rapidly over the following four years to approximately 4 per cent.
“… the recent reduction in KiwiSaver fund allocations to real estate appears to have occurred via a reduction to listed assets while the NZ Super Funds [sic] increased allocation occurred via unlisted property investments,” the CBRE report says.
The study – authored by CBRE NZ senior director capital markets, John Holmes, and head of research, Zoltan Moricz – suggests the Kiwi property shortfall is likely size-related.
At just $110 billion or so the KiwiSaver market represents less than 3 per cent of the total Australian superannuation assets under management, for example.
Even the combined financial firepower of KiwiSaver and NZS equates to just under two-thirds the size of the largest Australian super scheme alone – the conveniently named $300 billion behemoth, AustralianSuper.
Only four KiwiSaver providers manage assets in excess of $10 billion in an exclusive double-digit club led by the $20.4 billion ANZ (which does have a reasonable allocation to property through its in-house Australasian listed property capability and global real estate securities third-party manager, Resolution Capital.)
“Lack of scale may limit the ability of many KiwiSaver funds to invest in direct property, but it does appear to be a missed opportunity to optimise funds’ risk-return metrics,” the CBRE paper says.
Many KiwiSaver schemes have been reluctant to invest in unlisted assets due to liquidity concerns but several providers have made the leap.
The CBRE report comes amid a lobbying campaign from other direct asset managers – such as private equity and venture capital – to prise open KiwiSaver for easier access to illiquid assets.