Major superannuation funds will boost their holdings of direct property as the population ages, according to predictions by actuaries Rice Warner.

“With the consolidation of the market, there will be a shift to more illiquid investments as the very large funds will have significant, stable and predictable cash flows. Investments in infrastructure and property will grow,” the actuaries said in their report, Ageing and Capital Flows prepared for the Financial System Inquiry.

Investment may be directed towards Australian assets over the next decade, due to past under-investment and new opportunities, the report noted, but as domestic demand was satisfied superannuation funds would have to look offshore.

Rice Warner said fund managers and asset consultants on average expected direct property to return 7.9% over the next decade.

Listed property was expected to gain 8.2% over that time frame, while Australian shares and international shares were forecast to return 8.8% and 8.5% respectively.

3rd Sept 2014