Invest
Our super system, SMSFs and property
Australia has one of the best retirement savings schemes in the world. We now have the third or fourth largest retirement savings pool in the world.
Our super system, SMSFs and property
Australia has one of the best retirement savings schemes in the world. We now have the third or fourth largest retirement savings pool in the world.
I am often surprised that more people do not appreciate the benefits of the system that is founded on the superannuation guarantee system introduced in the early 1990s. The essence of the system is a compulsory long-term savings regime residing in a secure and tax-advantaged environment that maximises the benefit of compounding.
Reform was inevitable
I understand the frequent criticisms by various vested interests and particularly the view that it is too complicated and has been changed too many times. That’s fair enough, but I think there can be no doubt that some of the changes made by Peter Costello in the 2000s were too generous and more importantly unsustainable. Some people were pumping so much money into their funds they were turning it into a tax shelter and I don’t step back from my public view that it was correct to reign in the madness.
Follow the money
Money always follows assets that have a tax advantage, and in Australia that is housing and superannuation. I have always thought that I should maximise the money I put into super and that a self managed super fund was be a good vehicle for that. Given my role at Charter Hall, I am regularly asked what are good property investments for an SMSF. I have investments beyond my SMSF that sometimes may be more aggressive, or up the risk curve somewhat, but with an SMSF, particularly as one approached retirement, it pays to be risk averse. The large super funds who manage the great bulk of Australians retirement savings via the compulsory superannuation guarantee generally allocate between 8 per cent to 20 per cent of their portfolio to property. These people are the professional money managers and their actions I believe provide a good bench mark for self-directed investors and savers who run their own SMSF. The critical point to note is these professional money managers allocate their property dollars only to investment-grade commercial property. They don’t invest in residential property. The units are too small, the net returns (after transaction costs and taxes and upkeep) are too low and too unpredictable. It’s different in the US where there are very large-scale single owner residential complexes that institutions do invest in.
Follow the professionals
In Australia, the professional money managers look for the best quality commercial and industrial buildings with the best quality tenants, all generally with long leases. This is the type of property that Charter Hall buys and manages on behalf on investors and it’s why the big financial institutions are prominent among our clients. The good news is self-directed individuals can invest in this same asset class through Charter Hall direct property funds and can be co-investors in the very same buildings. We often have buildings in our funds that may have, say, 50 per cent institutional money and the balance made up of small unit holders – the new office building in Parramatta tenanted by Western Sydney University, which is contained within our Direct Office Fund and is currently open for investment, is a good example.
Skin in the game
As well as investing alongside large institutions, SMSF trustees and members who choose a Charter Hall direct fund or AREIT are also investing along side Charter Hall executives, and indeed the listed entity that is Charter Hall. We are great believers in the ‘skin in the game’ concept. We don’t expect members of the public to invest in any fund our business and staff doesn’t invest in. It is when the firm and its staff’s interests are 100 per cent aligned with investors that you are likely to get the best outcomes and performance. Combined with our approach to quality and risk, this is a key reason for our success.
Cedric Fuchs is the co-founder of Charter Hall.
Investment insights
Centuria announces senior internal promotions, strengthening leadership team for new property growth cycle
Centuria Capital Group (ASX: CNI or "Centuria") has strengthened its senior management structure with several internal promotions, effective from Monday, 15 April 2024. The new senior roles are part ...Read more
Investment insights
Institutions and wealth managers favour fixed income over equities, research shows
New research from Managing Partners Group (MPG), the international fund management group, shows professional investors believe fixed income is becoming more attractive than equities over the next 12 ...Read more
Investment insights
Gold prices soar to record high: Two surprising factors fueling the surge
Gold prices have hit a fresh record high, nearing $2,300 an ounce in Thursday trading, and while geopolitical tensions and expectations of interest rate cuts by the US Federal Reserve are commonly ...Read more
Investment insights
Alternative fund managers expect increased fines for regulatory breaches, survey reveals
A new study by Ocorian, a market leader in regulation and compliance services, has revealed that alternative fund managers anticipate a rise in fines for breaking regulations in their sectorsRead more
Investment insights
Institutional investors set to increase allocations to illiquid assets, MPG research reveals
A new study by international asset management company Managing Partners Group (MPG) has found that more than three-quarters (78%) of institutional investors and wealth managers plan to increase their ...Read more
Investment insights
Vanguard reduces management fee for its Australian Government Bond Index ETF
Vanguard Australia has announced a reduction in the management fee for its Vanguard Australian Government Bond Index ETF (ASX:VGB) by four basis points to 0.16% per annum, effective from Monday. Read more
Investment insights
Institutional investors and wealth managers recognise digital assets' role in diversification
A new global research study by London-based Nickel Digital Asset Management (Nickel), a regulated and award-winning digital assets hedge fund manager, reveals growing mainstream acceptance of digital ...Read more
Investment insights
Chinese and European brands dominate top 5 most valuable insurance brands: Brand Finance report
The latest Brand Finance Insurance 100 2024 report reveals that Chinese and European brands continue to dominate the ranking of the world's most valuable insurance brands. Read more
Investment insights
Centuria announces senior internal promotions, strengthening leadership team for new property growth cycle
Centuria Capital Group (ASX: CNI or "Centuria") has strengthened its senior management structure with several internal promotions, effective from Monday, 15 April 2024. The new senior roles are part ...Read more
Investment insights
Institutions and wealth managers favour fixed income over equities, research shows
New research from Managing Partners Group (MPG), the international fund management group, shows professional investors believe fixed income is becoming more attractive than equities over the next 12 ...Read more
Investment insights
Gold prices soar to record high: Two surprising factors fueling the surge
Gold prices have hit a fresh record high, nearing $2,300 an ounce in Thursday trading, and while geopolitical tensions and expectations of interest rate cuts by the US Federal Reserve are commonly ...Read more
Investment insights
Alternative fund managers expect increased fines for regulatory breaches, survey reveals
A new study by Ocorian, a market leader in regulation and compliance services, has revealed that alternative fund managers anticipate a rise in fines for breaking regulations in their sectorsRead more
Investment insights
Institutional investors set to increase allocations to illiquid assets, MPG research reveals
A new study by international asset management company Managing Partners Group (MPG) has found that more than three-quarters (78%) of institutional investors and wealth managers plan to increase their ...Read more
Investment insights
Vanguard reduces management fee for its Australian Government Bond Index ETF
Vanguard Australia has announced a reduction in the management fee for its Vanguard Australian Government Bond Index ETF (ASX:VGB) by four basis points to 0.16% per annum, effective from Monday. Read more
Investment insights
Institutional investors and wealth managers recognise digital assets' role in diversification
A new global research study by London-based Nickel Digital Asset Management (Nickel), a regulated and award-winning digital assets hedge fund manager, reveals growing mainstream acceptance of digital ...Read more
Investment insights
Chinese and European brands dominate top 5 most valuable insurance brands: Brand Finance report
The latest Brand Finance Insurance 100 2024 report reveals that Chinese and European brands continue to dominate the ranking of the world's most valuable insurance brands. Read more