Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Aware invests big in retirement (homes)
Aware already owned 70 per cent of Oak Tree, which currently houses more than 1900 residents and has a portfolio of 48 villages with around 2550 ‘independent living units’ (ILUs) in operation or development on Australia’s east coast. The acquisition of the remaining 30 per cent extends Aware’s $5 billion exposure to the living sector globally, which includes an $850 million commitment to build-to-rent in Australia.
“Aware Super is not only one of the nation’s largest super funds committed to delivering the strongest possible risk-adjusted returns to its 1.1 million members, but a leader in the retirement space with an innate understanding of what today’s retirees need to ensure they have a comfortable and secure retirement,” said Aware Super head of property Alek Misev.
“This is why we believe Oak Tree Group is an exciting opportunity to invest further capital in Australia’s retirement living sector – it is aligned to our strategic focus of generating strong returns for members while simultaneously catering for the future accommodation needs of Australia’s growing population of retirees.”
Aware’s initial 2017 investment in Oak Tree – made when it was still First State Super – was a high conviction play for the fund, underpinned by demographic tailwinds including Australia’s aging population and expanding middle class wealth.
“We have multiple villages experiencing waitlists, which confirms an undersupply in quality units catering for the 55-plus cohort who will represent about 31% of our national population by 2030,” Misev said.
“Australia’s Baby Boomer generation is wealthier than previous generations and combined with the strong demographic tailwinds, makes the retirement living space a high conviction sub-sector within our $5 billion living portfolio.”
While Oak Tree was Aware’s first investment in retirement living back in 2017, the fund announced that it was in a “retirement state of mind” with the purchase of 49.9 per cent in Lendlease’s Retirement Living Trust between 2021 and 2022. At the time, chief investment officer Damian Graham said the fund saw “synergies” between investments in the retirement living sector and its existing investments essential worker affordable housing and industrial developments supporting NSW Police Air and Emergency Services at Bankstown Airport.
“Retirement is such a critical life stage for Aware Super members,” chief investment officer Damian Graham said. “We have one of the largest proportions of members who are already in retirement, and we see a number of synergies in the way we think about the solutions we provide for our members, and the way we think about the management and performance of assets that serve the retiree market.”
