Cbus chairman Wayne Swan says the $85 billion fund’s property portfolio has proven resilient to higher interest rates and the fallout of the pandemic even though plummeting office valuations have led other investors to abandon commercial real estate investments.
While the value of Cbus’ property option fell by 2.8 per cent in the three months to September 30, the former Labor treasurer said the investment had delivered average annual returns of 14 per cent since ts inception.
“We’re not spooked by, if you like, the high inflationary, high interest rate environment,” Mr Swan told The Australian Financial Review Super & Wealth Summit on Tuesday.
“We’re really going back to something that we’ve had for most of the time of our existence. It’s been the last 10 years which have been dramatically different,” Mr Swan said.
Surging bond yields and high vacancy rates have squeezed commercial property valuations, particularly in the office sector, which is suffering higher vacancy rates relative to retail.
Some superannuation funds wrote off as much as 15 per cent of their extensive unlisted office property investments in their end-of-financial year valuations.
Industry super fund QSuper handed back the keys to a prime New York City midtown office tower this month after its investment went under water just 2½ years after valuing the asset at $US540 million ($855 million) on its books.
Other super funds have also flagged investment write-downs related to global property exposures, particularly in the office sector which is suffering higher vacancy rates relative to retail.
Cbus chair and former federal treasurer Wayne Swan speaks at the AFR Super & Wealth Summit on why couples need to be allowed to receive financial advice.
But Mr Swan doubled down on property. Cbus is the only super fund so far to sign on to Labor’s $500 million Housing Australia Future Fund and Mr Swan said the fund was looking to beef up its real estate portfolio.
“We’d like to do more [social housing]. The nation demands that we all do more to get social and affordable housing in place,” he said.
‘Discriminatory’ advice laws
As the $3.5 trillion superannuation sector faces criticism from both regulators and the Albanese government for being ill-equipped to support workers transition to retirement, Mr Swan put the onus back on legislators.
Cbus chair and former federal treasurer Wayne Swan speaks at the AFR Super & Wealth Summit on why couples need to be allowed to receive financial advice.
He said stringent restrictions on super funds advising members “discriminate very badly” against funds like Cbus whose members have low balances, meaning they will receive a part-pension in retirement.
“We need to have a situation where we can provide financial advice to couples, but you can’t do that at the moment, and the social security system works on couples,” he said.
“So our members who are going to be part-pension and part-superannuated need to get advice from us as early as possible on a couple basis. But you can’t do that under the current rules.”
Michelle Levy’s review into financial advice, finalised in December 2022, recommended super funds be able to offer advice taking into account a member’s “personal circumstances, including their family situation and social security entitlements”.
Assistant Treasurer Stephen Jones has said financial advice capabilities will be extended to superannuation funds, but has not detailed the specifics of what the new system will look like.
Source : FinancialReview