“You know we are a superannuation fund, we have 1.1 million members, they largely represent those who work in the nursing and the health sectors so we are unique in the sense that we are very close and understand who our members are, two-thirds of our members are women.”
Susan Freeman
Hi, I’m Susan Freeman. Welcome back to our PropertyShe podcast series brought to you by Mishcon de Reya in association with the London Real Estate Forum, where I get to interview some of the key influencers in the world of real estate and the built environment. Today, I am absolutely delighted to welcome Damien Webb. Damien is Deputy Chief Investment Officer and Head of International for Aware Super, one of Australia’s top performing super funds managing A$170 billion on behalf it is 1.1 million members. Based in London since October 2023, Damien oversees the fund’s international expansion strategy which aims to originate a UK, European and global deal flow for the global portfolios projected A$250 billion funds under management milestone. He leads a team of 20+ who have an initial focus on international property, infrastructure and private equity assets. Damien has over 25 years’ experience in funds management. He joined Aware Super as Head of the Real Assets team in January 2014, having previously worked at Perpetual Investments and ING Investment Management.
So now we are going to hear from Damien Webb about Aware Super, it’s newly opened office in London and its plans for international expansion. Damien, welcome. Where are you talking to me from?
Damien Webb
Hi Susan, thank you for having me on. I am talking to you from Aware Super UK’s offices here over in the West End of London. I am very much enjoying our new digs just near Piccadilly Circus.
Susan Freeman
That’s fantastic, so you are now firmly ensconced in London and as our listeners will be able to tell from your accent, you’re not a native Londoner and came here from Australia and I just wondered whether you had worked exclusively in Australia before you came here or whether you, you’d worked abroad before?
Damien Webb
This is actually my first time working overseas. I have the benefit of travelling a lot in my life, in my career but funnily enough, the working overseas, I don’t have many regrets but I’ve never worked overseas so this was a huge opportunity for me and my family which I grabbed with both hands. Going back in time, Susan, most Australians, you know, they travel a lot and most Australians after they’ve sort of finished their university degree start working in a year or two and then typically go and rotate over to the UK. That never happened foe me because my jobs back then were largely working with domestic fund managers so, as I said, I was really hopeful this would happen and I’m very fortunate this happened for me at this point in time.
Susan Freeman
We’ll talk obviously a little bit about Aware Super, what it is, what it invests in but what was the thinking behind opening in London?
Damien Webb
I think if it’s okay Susan, you know, I might just take a couple of steps back. I think it’s really important to understand the overall system that Aware Super operates within. So it’s a superannuation fund, you know, you’ve probably heard that a fair bit now but technically, you know, it’s our pension system, remuneration system, and it encompasses both people who are working and contributing to their retirement savings and those who are no longer working and in retirement mode but still drawing down their pension from us or from other people and I think for us we hit a real moment but of scale, the overall superannuation system is about $3 to $4 trillion, Australian, it’s growing to about A$6 trillion by about 2030 and there are a few reasons for that which we’ll get into. But in terms of Aware Super’s case, for about A$180 billion fund, we’re growing quite quickly both organically and inorganically and we expect to be, you know, hitting A$250 billion in the not too distant future and as a fund that has half of our assets, you know, desired to be managed internally and half of our assets desired to be managed externally, we felt the need, we had to have people overseas to help us invest at scale and so that’s really that was the driver of our desire to open up this office in London, which is our first international office.
Susan Freeman
And the intention is that from London you will be able to invest in the UK and across Europe.
Damien Webb
That’s correct, yeah. So, we made a very significant commitment as part of the Global Investment Summit at the end of last year, for which I was there and then and my CEO, Deanne Stewart, had had had to court with the previous government and it was a great event and we made a sort of a significant commitment to invest A$10 billion or £5.25 billion through this office over the next five or so years and that is effectively to invest in the UK, in Europe, but also potentially North America as well so, yeah, it really is an international office at this point in time, covering the rest of the world although we can talk about how Asia will be covered which is, will be largely still done from Australia.
Susan Freeman
And was the decision affected by the Free Trade Agreement with the UK or all part and parcel of the same thinking?
Damien Webb
Look I think that the Free Trade Agreement happened at a very similar time as we made the decision to come and launch this office. The Free Trade Agreement wasn’t a driver, it wasn’t a driver for the office but it certainly assisted the overall environment, the overall atmospheric and frankly, the ease of doing business that countered so heavily towards the UK’s favour and to you know London as you know a still very much at the preeminent location for you know businesses like ours that invest in humans, investing in financial services to offer that city and the diversity of choice in terms of the workplace environment, also the living environment so it happened at a similar time and it certainly helped as a tailwind but it wasn’t necessarily the driver of why we chose to do this.
Susan Freeman
And did you think about possibly going to other European cities instead of was it always going to be London?
Damien Webb
No, no, no, we looked at all of them. We, we did a very deep dive. We obviously, so again taking a quick step back, you know the three broad areas we thought about was Asia, was North America and it was Europe, Europe and the UK put together and you know Asia, we thought about, we thought well we can cover that largely from Melbourne and Sydney. Europe we thought was the right port of call for the first office, we have hopes and aspirations that we may open a North American office in the future subject to some growth, further growth from the fund, but we though that Europe was a really good best of all worlds, you know, the UK access Europe, access North America and so it was a sort of good one-stop shop. So we sort of settled on UK and Europe as sort of the preferred region to begin with for a range of reasons, mainly because again UK and Europe, it accesses to those geographies but also placed to access the rest of the world. North America, I think it’s such a vast marketplace even of itself, if you have a North American office, you are largely using it to access North America and so that was our thinking and then we did a big scan of the various cities within that, all the European capitals and we scored them on a range of factors, you know cultural, affinity with you know tax advantages, employment benefits, ease of doing business, all those sorts of factors and London scored very well.
Susan Freeman
Well that’s really good to know and I know you’ve been working on getting your European team into place. How are you doing? What’s the current head count and are there more positions still to fill?
Damien Webb
We’re very happy with how it’s gone. We wanted to have about fifteen people by sort of the, you know the first quarter of this year and we launched the office in November 2023 so by March, end of March/April this year we were hoping to have about fifteen people in the office. We’re actually through that now but you know it’s July now and we’re close to twenty people in the office. We’re hiring probably about another four or five this fiscal year. Our fiscal year by the way is 1 July to 30 June, a bit different, but for our fiscal year we’ll be hiring about another four or five people and just to know as a footnote, our first wave of the strategy is really focussed on the private market, so that’s property, infrastructure, private equity and really pleasing, we’ve also built out our business management team, just got a compliance office management but also now tax, legal and HR and finance and so that’s been a really, really critical enabler particularly now we’re doing more deals that the tax and the legal team here has been fantastic to have recently.
Susan Freeman
And have there been any surprises, anything really surprised you about working in London? Anything that you weren’t expecting?
Damien Webb
Look, we did a lot of homework. This is our first office overseas and you know our trustees, you know we are Susan a, we’ll talk about the nature of our organisation, we are a profit for member, not for profit fund, we’re not a fund manager per se like a, like a Macquarie or a Black Rock, you know we are an asset owner, a pension fund, and so you know our trustees were, wanted obviously to be assured that you know this is going to be a big spend on behalf of our members and our members are largely nurses and teachers that was done the correct way so we did a lot of homework, we took a lot of external legal advice and so I think thus far there haven’t been any you know real surprises, I think there’s certainly been some learnings you know on the margins, particularly as we go from planning, you know in Sydney and Melbourne to executing live, you know here in the marketplace as you know as the world continues to do what it’s doing, as politics continues to evolve and as geopolitics continues to evolve and the economies and interest rates evolve as well. I think probably the main thing to observe is that the culture of the office was of critical, critical, critical importance to our trustee directors. We did a lot of case studies of expansion internationally from asset owners that hadn’t worked as well and a lot of it came down to you know whether the culture of the office was similar to that of the head office and as a profit for member, a member focussed organisation, that focus was really critical and so I think what we’ve done really in setting up the office, we’ve seconded a number of people into the office, we’ve hired you know very deliberately but certainly for me as leader of the office, we’ve also spent a lot of time as a team making sure we’re very clear on a number of factors and how we communicate with each other and I think really probably that the number one observation as it lies to culture is that London is a very diverse workplace and thus there are people who come into work with you know different expectations, different styles and thus you know we’ve been working very, very hard to really understand each other and make sure we set some, some clear expectations of you know what it’s like to work together at Aware Super and what success looks like and I can talk to that a little bit later but that’s been probably the main, main focus for me, which is you know that we want set the right culture.
Susan Freeman
That’s interesting and I suppose as the team grows it will be more important to sort of keep that going, it’s always more difficult when you’ve got a bigger team.
Damien Webb
Absolutely and I think we didn’t want the culture to necessarily be a sacred cow that can never change, you know, we were certainly proud of our culture and our member first focus and how that feeds through to you know our what we believe is you know things like you know relatively humble way of way about we go about ourselves, the values of the capital and the job we’re go do on behalf of our members and how we take that very seriously, how they want their money to be invested again and the values that go around the governance to that but we also wanted to, you know we thought what a, what a shame, wouldn’t it be a great shame to go to you know a wonderful, diverse, rich place like the UK and like London and Europe and the rest of the world and not pick up some learnings, you know, we, we definitely believe in diversity as, as the driver of better outcomes and so we definitely wanted you know a natural, natural outcome of going to a place like London and hiring a workforce here, it will be more diverse, it will add to the sum of the parts and thus that should lead to again to a better team culture. So we were on the lookout for making sure that we preserve the things which are nearest and dearest to us but also on keeping a better eye on how we could also enhance our culture by this diversity.
Susan Freeman
It’s good to know that so much thought has actually gone in to how you go about this and let’s talk a little bit about what you are invested in at the moment in the UK and Europe and what you aim to be focussing on as we go forward because there’s so much change going on at the moment across the piste and built environment and I’d be really interested to hear you know your thinking whether it’s going to be more of the same or whether you, you know are shifting into other sectors.
Damien Webb
Yeah, look I think that I’ll have a focus now on you know given the name of the podcast and the property side of the portfolio, happy to talk about infrastructure and private equity if you’d like but for us, again our mandate for the first wave is the private market space, we will look at other asset classes down the road but right not it’s private markets. In terms of property, I think that the portfolio, just again, just taking a step back and sort of giving you the birds eye view of the portfolio and what that then means for how we’re looking at opportunities. The portfolio as a starting point is in good shape, you know we have about A$10 billion currently invested in property for the fund, a bit more than that actually, and it is predominantly invested in the living space so, you know, build to rent or multi-family, PRS, private rental, as well as the retirement living space, so seniors living as well as serviced apartments and then about 45% of our portfolio is invested in that sector and then we also have about 30% of the portfolio is invested in industrial and then about 25% is left over invested into the retail and the office sector so our overall office and retail sectors are quite low so coming to the UK, we have three, three you know real estate operating companies already on foot, they’re great investments, we’re seeking to sort of support them and build on them. In the UK headquarter, it’s Get Living which is a you know a large, multi-family or again a you know a build to rent developer and operator here in the UK, we’ve got a similar business headquartered in Madrid called Vivenio and then we’ve got a smaller platform headquartered in Amsterdam called The July, which is around serviced apartments or aparthotels. All three of them have growth aspirations of growth ambitions and we’re looking to maintain those and support those. I think though then for our capital deployment or additional opportunities, we’re feeling that we would like to sort of make sure we didn’t overemphasise the living space too much. On industrial, as I said where about 30% of the portfolio is there, that’s all in Australia so I think certainly our living portfolio is at a significant weight in the portfolio that’s global. Industrial is all invested in Australia particularly in Sydney and Melbourne where there’s a lot of infrastructure going in, new airports and so it made a lot of sense to develop land to suit both spaces there particularly as ecommerce got more runs after the pandemic and so we’re obviously keeping an eye on pricing there and certainly we may do something more in the industrial space or on sensible adjacencies to that, things like storage or cold storage, self-storage, are certainly some things that team is spending its time looking at. I think the area that I think is intriguing right now and something we’re feeling that we had the benefit of can potentially be somewhat contrary is you know there certainly seems to be a mismatch or a dearth of capital in the office and the retail sectors, I still believe that you know when we went to find our office space here in the West End, it was very competitive to find an office location here so I think that we’re intrigued by that opportunity set and then it’s a big, big topic of conversation and of itself but I think we’re, we’re intrigued by what a contrarian investment stance could be in those other sectors.
Susan Freeman
So what would have to happen for you to pursue those opportunities?
Damien Webb
Look, I think, again taking a bit of a step back, I think that the UK is actually from what we observe, the pricing in the UK has moved pretty quickly but I still think has further to go. I think for us, you know we don’t have to be invested in office and retail, the 25% that we have in the portfolio it’s all located in Australia, it’s all located in the high quality markets in the best spaces for office in Melbourne thus you know we have the benefit of a clean portfolio to look to expand overseas and to do further investments and add to the portfolio there but I think for us predominantly it’s around pricing, Susan, the pricing has moved more quickly in the UK than in Europe, the US has obviously been pricing quickly as well. I think that the supply and demand dynamics are also favourable to the UK in particular to London as well so, I think there’s a lot of things that are intriguing for the office and retail space you know here in the UK and in London versus other parts of the world but thus as we, as we currently see it there’s still probably you know a bit of movement to go around pricing for it to be you know a clearly investment opportunity.
Susan Freeman
And do you tend to look in London or do you look across the regions as well?
Damien Webb
Yeah, we look across the regions as well, Susan. I think, I think for us there’ll certainly be a staged approach to all of the things that we currently do, you know for example, we only really launched the office here in Noember, I feel that we’ve got a number of investments already, you know as I said in, in, in The Netherlands, in Spain and in the UK, in property I should say, and I think we feel you know quite comfortable that you know and understand the dynamics of the UK, I wouldn’t suggest at this point in time we want to, you know that we know everything there is to know about the other markets of the Continent, we hired recently the people, you know with some, some great experience that it helped us develop those insights and further the strategy there, so we certainly can look across markets but I think there’s a lot of things suggesting that you know the UK property market you know is worthy of a second look.
Susan Freeman
And you mentioned in the living sector, retirement and it is something that gets discussed quite a lot in the UK because I mean we have got a aging population with a need for the right sort of accommodation but we don’t seem to build very much housing for later living and people say, “Oh it’s complicated, there are operational problems, there’s the care side of it.” Is that right? Is it really a difficult sector to get involved with?
Damien Webb
Look firstly, I don’t profess to be a complete expert on the seniors living space here in the UK or in the Continent but look, we’ve had a look at it actually and certainly you know similar with North America, a lot of the tailwinds, the you know the demographics, it’s very supportive of this and there’s, there’s clearly an undersupply of quality lodging for you now senior citizens, who want to obviously have an element of support around where they want to live for a period of time and we’re probably the largest institutional investor in seniors living in Australia, not aged care, you know haven’t invested in aged care in the property portfolio but certainly independent living, you know seniors living in the time that we’ve been in Australia, we have two platforms that we’ve made significant investments into in Australia and I think that we really like the tailwinds for that. I think that you know we’ve, we will certainly be looking at that space here in the UK but it’s probably not necessarily something we’re prioritising at the highest level at this point in time. The reason being Susan is that you know as I mentioned before, we’ve got about 45% in the overall living space, it does include seniors living in Australia which we’ve got quite a lot of so, I think for us we’re just prioritising some other sectors to make sure that our portfolio doesn’t get too, too concentrated but I would agree with you, there’s a lot of compelling demography and under supply there and at some point in time there will need to be capital that goes into that space but right now, I think we’re sort of intrigued by some other opportunities as a, as a new term prioritisation.
Susan Freeman
No it seems to be me would could probably learn a lot from Australia then if you’ve got a more developed senior living sector than we have. Now, you mentioned storage and cold storage which, cold storage is a relatively new concept to me but is there some increased demand for cold storage? Is that why you’re, you’re looking at that sector?
Damien Webb
I think so. I think that the overall, you know we look at a lot of long-term trends and drivers for the property portfolio and I think the shift to online retail, online you know, the shift to ecommerce which was largely just sped up by the pandemic, it was already in place but it was accelerated by the pandemic. I’ve moved here from Australia, we use Ocado a lot more here than we, we used some online grocery shopping in Australia but largely there were lots of, you know, very large kind of grocery markets you can go to where I lived back in Sydney in Australia so I think that there is, it’s a sensible adjacency for us, so we’ve done a lot of industrial sheds out in western Sydney in Australia, as I said next to the second airport that’s going in there that has a lot of, a lot of you know ecommerce related storage and you know hard logistics. Cold storage is a you know sensible adjacency to that shift as more and more consumers seek to purchase their perishable goods online, you also need to have a supply chain that can support that and we’ve actually made a number of investments mainly through the lending side in Australia to a number of the cold storage operators and we’ve had a look at those businesses and we think they make a lot of sense. Technically, they is a lot more involved in the build, you know so if you’re going to do a cold storage build and certainly to suit a customer, to suit some of those operators, you know it’s quite a technical build and you need to get that right so, and it’s also a lot of power so it’s not dissimilar to a lot of the considerations you might make to data centres for example and so look, it’s not something we’ve done before but certainly again the supply dynamics there are interesting and there’s a lot of tailwinds to it but it is a more technical build and again it’s not as straightforward.
Susan Freeman
And I suppose with global warming, you know where I’m sitting at the moment it’s 27 degrees so we’ll be more demand for, for cold storage. You mentioned data centres which again, you know, are something that everybody is focussing on; I mean is that something that you’re actively looking at?
Damien Webb
Yeah, look we have quite a significant exposure of data centres already. We don’t really, I mean it’s splitting hairs, we can do it more on the operating side of the infrastructure portfolio, we’ve had the benefit of you know running both our infrastructure and property portfolios quite closely together, we’d do a head of property, we’d do a head of infrastructure but they’ve always worked under, for me, privacy back in Australia as the head of real assets and the deputy CO and the head of real assets before I came here as the Head of International and Deputy CIO and so, you know we had the benefit of saying well look let’s not get hung up on the definitions but from our previous experience, the main investments we’ve made so far for example, we invested in Switch which is a North American big data centre operator but a number of other operators as well we invest into. We’re certainly looking 24.38 certainly supported by AI but thus far we haven’t done it so much in the property portfolio.
Susan Freeman
And do you prefer to invest in the actual real estate or in the operating companies or do you do both?
Damien Webb
Yeah, no, we’ve got a strong, clear preference to invest through the real estate operating companies themselves. That’s a fairly strong flavour of our, of our portfolio and our approach and our strategy. We’re a large fund, you know A$180 billion growing to A$250 billion, you know we’re going to need to be investing you know A$20, A$30 billion in property you know in the coming, coming years and one of the key reasons why we’ve sort of set up this office, it’s to really industrialise and strengthen our sourcing and our asset management and portfolio management capabilities to handle that growth. We will not be successful if we’re necessarily getting involved in sort of you know looking at, at managing buildings, doing the leasing. That, that’s something that we find is best suited by having them within the companies which we own so we find our best approach is to target the portfolio that we want. What are the sector settings that we want around industrial, around living, you know seniors versus PRS, you know cold storage, some of these new asset classes. What do we want to be in office? Do we want to develop? Do we want to build? Do we want to buy? You know, is there an opportunity in listed space versus unlisted? Those are the decisions we spend a lot of time with as a property team. The implementation side of it, we find what works for us really well is to then invest through directly, through real estate operating companies and to involve ourselves for the governance of those companies, supporting the CEOs and their management teams, find it gives us a lot of flexibility and agility around how we can manage the portfolios and exposures versus you know the methods that we’ve had in the past, which was to invest in funds per se or invest into you know single assets.
Susan Freeman
And in terms of size of deal obviously you have got a lot of capital to deploy. Presumably, it doesn’t make sense to you know get involved in lots of small deals. What sort of scale of operational deal do you ideally look for?
Damien Webb
If I point to our existing investments, look I think that for us you know our starting point would be £250 million I think would be the starting point for, for an investment in a real estate operating company. Nirvana for us, Susan is to invest in an existing or being developed or to be set up operating platform and entered to invest through that and to grow that so, you know a £250 million investment could then grow to £500 million to £750 million, that would be the scale that we’re seeking to do and I think that would, that would work for us.
Susan Freeman
And we were talking about the Australian superannuation funds and we know there are also one or two other funds who are here. How do you compare? What would you say is the Aware Super USP?
Damien Webb
Yeah, look, I think that, I think probably there are similarities you know and then there are differences from the overall investment strategy, I think the… I might deal with the similarities first because I think it’s important to establish the USP versus other providers of capital into the UK marketplace. You know we are a superannuation fund, we have 1.1 million members, we largely represent those who work in the nursing and the health sectors so we are unique in the sense that we are, you know, very close and understand who our members are, two-thirds of our members are women because they dominate the health and the teaching sectors, thus that means that we’re very strong advocates while we believe very strongly that the Australian superannuation system is a huge, huge benefit for the Australian nation and economy and will help reduce reliance on the aged care pension and obviously, you know create a huge pool of investible savings. For us there are some things that don’t work so well with the bulk of our members being women and that is, for example, that women when they retire often have less than men in the super, on average about A$25,000, Australian dollars, less, so we’ve been very strong advocates for issues like making sure that there’s compulsory super paid on paper until leave and that’s something that’s recently been changed or is to be changed and so, I think those are some things that give us you know a very unique insight into our membership and making sure that we’re delivering to their expectations, you know, I think also that the values around you know again it’s a huge of pool of savings, you know our nurses and our teachers have a lot of issues that impact them particularly around affordable housing being pushed further and further out of city centres, commuting further and further to log on for rostered work and do shift work at hospitals or at schools and so we want to make sure we pay close attention, it’s their money and it’s, they care about the environment, the economy, the world that they work, live and then retire into and so we’re trying to stay very, very true and keep very, very close to what we think they would want us to do with their capital. Clearly, it isn’t all about the best financial return in retirement for them and for that we’ve done you know a good job, it’s been a good year for us, we’ve contributed you know really strongly, double digit returns last year and you know almost a near 9% return per annum net over the last ten years so the return side of it is stacking up well, we’ve also got some awards this year which is good. I think it’s really about understanding them and what they need. The second thing I think in terms of our overall investment strategy, I think there are, it’s whether there are some differences in ourselves and other, other Australian funds so here and the Australian marketplace. In property, I think we do have a relatively unique investment strategy that we invest in real estate operating companies, you know, Get Living, Vivenio, The July, we have many, many more in Australia, we’ve created our own platforms such as you know we have the largest keyworker affordable housing platform in Australia because again, our members are largely keyworkers so I think that strategy of really being clear on when we want to develop, you know when we want to buy and then having a really clear view of the overall portfolio strategy and articulating that through operating companies is, it’s pretty unique to our approach in property and it's certainly something we continue here in the UK.
Susan Freeman
That’s fascinating because I have to say you know having done a little bit of research, I hadn’t seen anything about the makeup of your members and how that informs you know how, how you look at your potential investments so, thank you for that. And where did the name Aware Super come from?
Damien Webb
Oh gosh Susan you’re getting into questions that are probably above my pay grade, look I think we were originally called First State Super anyway so going way back into the annuls of the history of our fund so we were the default fund for the New South Wales State Government so New South Wales is the state government that sits around you know Sydney as its capital and so we were the default fund for that state government. We then since merged with a whole bunch of other funds, the Victorian State Government Fund, a number of funds in the rest of the country and so we felt that we needed a more national, national brand and being Australia, again it’s a whole big other topic Susan around you know the state of how we, how we operate the funds in Australia but as you may know, you know it is compulsory system in Australia but it’s also preserved but you can choose to go to different funds and so having brand equity is really, really important and so our CEO Deanne Stewart who’s you know very strong at leading our strategy on this front, did a lot of work and decided that you know First State Super was a sort of a state specific brand that could do with you know enhancement for a more national brand and so Aware Super was chosen and that’s what we’ve been sort of investing into now, you know very heavily for the last five or six years.
Susan Freeman
Okay, you know I wondered. And you mentioned infrastructure and obviously with data centres there is I suppose an overlap with real estate but since we’re all focussing on infrastructure you know in the UK now and wondering you know what’s going to happen with the new government, what do you look for in infrastructure because you know the term covers such a wide range of potential investment so I guess you’re not, not investing in railways and, but what are you looking at?
Damien Webb
You know, our portfolio and infrastructure in Australia, it’s very eclectic, it’s very eclectic and again it’s almost a whole, whole other podcast to go through it but you know just to, just to sort of you know whet your appetite I think you know some of our key investments in Australia have been things like land registries and motor vehicle registries, yeah. We actually have a portfolio that we built up pretty much from zero in 2014, 2015 with the infrastructure team there and you know we have actually limited exposure compared to our peers in you know in economic assets like ports, airports, toll roads, we actually have relatively limited exposure there. What we’re seeking really is you know essential services, ideally with you know monopoly style characteristics, we want inflation linkages in the cashflows where we can get them and ultimately that led us down to things like in Australia there’s been a, they had a pretty successful model there of offering assets for private investment so that the return to government hands after a period of time and they recycle that capital into building other pieces of infrastructure and it’s been pretty successful and so there was a period there where a number of the land registries, so if you own a house and you want to do anything with the house and it affects the title then you know, you have to go to the registry, there’s one registry per state and they’re all cash CPO index linked cashflows and then similarly with motor vehicles, you know if you want to register your motor vehicle it’s, it’s once done state by state. And so those have been wonderful businesses for us, you wouldn’t classify them as your classical definition of infrastructure and so they’ve been good investments for us. We’ve done a lot in digital infrastructure Susan, we, we’ve done a number of privatisations in Australia, de-listings where we’ve invested in listed companies and then taken them private such as Vocus in Australia which is investing in broadband nationally and those have been great businesses for us to own.
Susan Freeman
I wouldn’t have thought of land registries under the heading of infrastructure. And are they Government owned in Australia or you actually buy the land registry?
Damien Webb
No, they’re Government owned so they’re state owned registries and what they’re doing at the moment or what they’ve done you know five or six years ago was they offer them up for the concession for private investment for you know thirty years, forty years. We were, we’ve been in a number of successful consortiums to operate those concessions for that period of time. Typically, there goes with them a number of enhancements that need to be done for example you might be modernising the IT infrastructure or moving more from paper base you know literally, you know if you wanted to in the olden days you’d you know take up your plans up to the local land registry and get it stamped because you want to do a renovation or redo your mortgage or whatever, obviously you know they needed to go to you know full, fully digital and so the private market operator comes in and enhances the overall architecture you operated for thirty, forty years, you get you know annually indexed Melbourne or Sydney inflation linkage which has been obviously fantastic for the last few years with the strong inflation imprints and then you know once you’ve operated for a number of years you hand it back to the government so it does go back to the public purse at the end of that time period and it’s a sort of you know really, we are looking for you know long-term, stable, inflation linked cashflows, they’re wonderful investments.
Susan Freeman
And you haven’t put the land registries onto a blockchain system which is something we’ve been looking at here.
Damien Webb
No. That’s been talked about a lot, the blockchain technology. I was, I was a director for a couple of the land registries early on in their, in their you know after we’d acquired them so I haven’t been keeping fully up-to-date on where they’re up to right now but no, no, I think they’ve stayed in their current architecture.
Susan Freeman
Yes, it’s something to look forward to. And energy transition and the opportunities there, I think that that’s something that you are looking at or sort of are invested in, I mean are there those sort of opportunities in the UK and Europe?
Damien Webb
Yeah, there definitely are and again under the infrastructure, you know the two areas that we’re most active in and it’s, it’s, it’s not you know this is relatively commonplace, the two most consensus areas for investment are the two largest ones in infrastructure which is digital infrastructure and energy transition and you know if you go to most funds, what are they doing, it’s those two areas, so unsurprisingly for us those have been a big area of activity for us, we haven’t concluded an investment in digital infrastructure here in Europe, we can’t talk about it just yet because it’s going through its final regulatory approvals and we have certainly been spending a lot of time on the energy transition space and what would be good investments there. We haven’t made any yet but I’m hopeful in this coming year we will, again I think we need to just keep a weather eye on pricing. I’m fascinated by the property space because it’s pretty unloved, there’s a dearth of capital and there’s a lot of difficulties there. I always find that the most attractive and rewarding investment environments, I usually shy away from areas where it’s consensus, there’s lots of capital and I think we are still finding our infrastructure, you know if there’s a good asset, you will get a lot of bids still in the infrastructure and so I think there are things to do there and certainly digital infrastructure and energy transition still will be of interest to us but I’m wary, I am wary of the pricing and they’ve got to be quite a standout opportunity in those spaces. Private equity, I think is sort of middle of the road, there is some areas of volition still but there’s certainly been some areas of challenge of late and so I think that that investing environment will support you know GPs that really know what they’re doing and we’ll continue to build up that portfolio as well.
Susan Freeman
So, you just referred to as, to real estate as ‘unloved’. Why do you think that it is?
Damien Webb
Well, have you spoken to any COOs lately, Susan? I think that if you know we rule the books at 30 June, if you rule the books at 30 June and look down the score card, property has been a very, very weak performer, absolute, for a couple of years now, you know same with retail, you know three or four years ago and then obviously this continued into, into the office space and you know the 39.20 sectors, you know living and industrial have had a bad year, you know you look at private equity and infrastructure and then you know they’ve done well, you know typically positive returns has been our experience and then you look at equities and again I know it’s a fairly, fairly narrow market, it’s the ‘Magnificent Seven’ in the States plus some other things but the returns from equities have been stellar. So, it’s unloved in the sense that it has been detracting from the overall outcomes and there are obviously a lot of legacy investments in there that are challenging for some investors, our portfolio is pretty clean right now which is sort of why you know we’re, we’re quite happy to be leading into some more contrarian opportunities. There’s reasons to be optimistic, I hope. I am, you know, I think that with the 40.08 cycle starting and the, and the inflation cycle starting to show some signs of stabilising potentially, there could be straight cuts coming through, you know we’re not, we’re not overly getting ahead of ourselves there, it will be what it will be but I think that there is an opportunity now but yeah certainly, it’s been a, an asset class with a lot of headwinds that have, that have detracted from the overall outcome from members in the last few years.
Susan Freeman
Which should create opportunities, so I know you’re keeping an eye on that.
Damien Webb
That’s exactly right, I mean that’s why I think you know again if you look at the score card, we’re spending quite a bit of time and, and if any, you know, our, our, our capital to deploy in the UK through this office, there is you know there’s, there’s nothing more to be done in property than there are in the other two asset classes so, yeah, we’re hopeful, with a lot of hard work and with some, probably some tough negotiations on pricing but there could be some, some better returns ahead, maybe.
Susan Freeman
Let’s hope so. And the property sector in the UK has, we talk about the fact that it has a bit of a negative image for various reasons and I just wondered whether that was similar in Australia?
Damien Webb
Look, I, I’ll relate one, one anecdote and I’ll try and you know redact the names to protect the innocent but you know we, we set the office up over here, we seconded a number of people over, there’s a very large property conference over here, I was going with my head of property and the property conferences in the Continent and I couldn’t make it, there was a clash in my diary and I said, “Look”, you know to a senior lady in the team here, I said, “Oh look, I can’t go but you should go” and then there was a panel on and I said, “You should speak at this panel” and she was very reluctant to go and I was a bit offhand and, “41.54 you know you should go” and then, and I sort of had to double back you know a few hours later and said, “I’m sorry, you didn’t seem like you’re that keen” and she was like, “Oh no, not really” and I think it was because there can be this you know this laddish atmosphere that gets built around some of these, these larger forums and you know I realised I had a bit of an unconscious bias, you know I didn’t quite appreciate you know my view of what that experience was like was completely different to her experience and in the end she went and it was very productive for her but I had to sort of take a moment and go wow, you know that, that’s really, really interesting. I’ve worked very hard with the leadership here and in the city of Melbourne to make sure that the office we’re building up here is diverse and we do have strong, equal gender diversity here in the London office and most importantly to me it’s, it’s diverse at all levels of seniority. Sometimes in investment teams you know you can have you know 50/50 of close to it in male/female but then you know the, it then thins out the more senior investors you have, it tends to be biased towards the men so, thus far, you know it’s early days but the twenty people on the office, it’s 50/50 and that continues throughout the seniority which I think is great for me and in terms of the property team here as well, you know it’s only four people in the team but again it’s 50/50 gender, gender diversity which is great. Look, I think the property industry, I do think it’s a huge asset class, it really is, you know when I go and do remuneration benchmarking for infrastructure or for private equity, it’s a very homogeneous sector, you know you can look at the benchmarking of the remuneration frameworks, you can look at the hiring and it all, what it all you know, it’s pretty close, you know it mirrors what you think it should be. With property, it’s a vast asset class, you know there’s lots of people involved in the leasing and you know in all sorts to do with the physical built environment and then you’ve got all the financial investors on the side and I think it’s such a vast heterogeneous asset class that within that you need to sort of actually you know make sure you navigate that really, really well and I think we’ve probably still got some work to do here around that so, yeah, so I think there are, there are some challenges around that, nothing that’s not, not workable but yeah, there are some things I’m learning.
Susan Freeman
And does that cause you difficulty when you’re, when you’re recruiting because obviously you want to have a sort of balanced team and if real estate has a bit of a image problem, do you find it difficult to recruit the sort of people that you’d like to recruit to your team?
Damien Webb
No, I don’t and look, and let me sort of, let me clarify, I don’t think property has an image problem, I really don’t, I think it’s you know there is just as much demand for really smart, young investors coming out of fund managers, coming out of banks, coming out of consultants who want to work and make their career in property, just as there is in infrastructure, just as there is in private equity, just as there is in the equities, just as there is in credit, just as there is in strategy, so I, I don’t think I see you know an impossibility at all in terms of you know building a really highly productive, high performing, diverse team. I just think there are some areas where you know it is such a big asset class and there is a greater variation across that much larger landscape of probably experience that you just need to be more attuned to what you’re doing and again that, that conference experience is one for me, where again there was someone else in the team who had a different perception of what that event was going to be than I had perceived. It took some work to sort of clarify it and make sure that you know we’re aligned and then you know it was a good experience but you don’t get that necessarily you know in a private equity or in infrastructure because you’re working predominantly in you know financial sponsor ecosystems and it’s just a, it’s more straightforward.
Susan Freeman
So, you’ve been in London for a little while now and I just wondered what you most miss about Sydney and Australia?
Damien Webb
You know, it’s early days yet, Susan, I, I hate to say this in front of my compatriots but I don’t miss too much, I’m really loving it, I’m loving the, you know, a lot of people always want to sort of talk about “oh sorry about the weather”, I, it’s fine, I, you know we arrived in the dead of winter with my kids arrived off the plane in December having completed their year of school in Australia and went straight back into the UK schooling, that was pretty tough for them and so when they flopped across the line in, you know in July for their summer holiday, it was eighteen months virtually straight of school so it was a pretty rough ride for them. You know, I love Australia, it is definitely my home but I think thus far I have a, and I try to get this for all our investors of curious mind, I love new experiences, you know I’ve never worked overseas so I never take that for granted and I think you know the, the London scene and you know the proximity to Europe, the proximity to North America, proximity to you know to everything that’s going on in the world, the good and the bad, the challenging and the alluring and there is obviously lots in each, it’s fascinating and it’s such a big stage and Australia is a wonderful, wonderful part of the world but it is a long way away and I think, you know, I’m really relishing the opportunity to get into it over here and I think it’s also, you know I’m the Deputy CIO, I think it’s, off Aware Super, I think it’s really critical for Australian superannuation funds to have that international investing experience because they become bigger and bigger investors and bigger, bigger players in the capital markets, they are already in Australia, they are obviously you know big fishes in a small pond, we will increasingly over the next twenty, thirty, forty years be you know more meaningful fishes in you know, in these really large ponds, I think it’s critical that you get this experience and understand how to you know raise, manage and then lead teams in markets like Europe, UK and North America, so I think it’s, it’s a great opportunity so I don’t, I don’t miss it too much, Susan, I’m a happy camper.
Susan Freeman
It’s brilliant, Damien, that is great, thank you very much.
Damien Webb
My absolute pleasure.
Susan Freeman
Thank you, Damien for talking to us about Aware Super and giving us the Australian perspective on investment into the UK and Europe. So that’s it for now. I hope you enjoyed today’s conversation. Please join us for the next PropertyShe podcast coming very soon.
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