Superannuation Fund Asset Allocation Trends

Key Points:

• There is significant diversity in how the superannuation industry, locally and overseas, allocates investment funds under management. Real estate allocations in New Zealand tend to lag Australia, especially in relation to unlisted, direct real estate investments. 
• While the New Zealand Super Fund increased its allocations in recent years after developing a long-term strategy for real estate investment, very little KiwiSaver investment has been flowing into direct property. 
• 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.
• With the rapid growth in total KiwiSaver funds under management, greater allocations into direct real estate would also bring a welcome injection of liquidity into the industry.