Greenway offers super funds a new asset class

Justin Greiner

Greenway Capital is aiming to provide superannuation funds with a new asset class, residential real estate, through the opportunity to fund its new equity mortgage product.

Greenway head of distribution Justin Greiner said: “We are creating a new channel in capital markets. This is a channel that was previously not available to institutional investors, and that is residential real estate.

“Clearly, given the performance of residential real estate, which is sort of intuitive for most people, but runs roughly at around 6 per cent for the last 50 years, it is something that is quite attractive. That’s not just because of the returns, but as an asset class it’s negatively correlated with other asset classes. So it sits quite neatly in the portfolio of the big super funds,” he explained.

Greenway has deliberately avoided pitching the mortgage product toward both the pensioner and the first homebuyers market in order to ensure a sustainable asset class is provided for wholesale investors.

Apart from the portfolio diversification characteristic, Greiner thinks superannuation funds will find investing in the equity mortgage attractive because of the long duration associated with the product. Most mortgages will span roughly 15 to 20 years, and Greiner sees this as a perfect chance for super funds to match the investment against their long-term liabilities.

According to Greiner, the structure of the instrument should also be a plus for institutional investors.

“Here’s an instrument where we’re guaranteeing the principal because the client will always pay the principal back, plus when they get a return, it’s a leveraged return over and above a proportion of what their share of the property may be,” he explained.

Greenway is currently looking to set up a $1 billion origination trust consisting of commitments from super funds that can be drawn down to write mortgages on a quarterly basis.

“When we get enough mortgages we securitise them. We take maybe $100 or $200 million of mixed types of mortgages as a portfolio and we sell it to other super funds or capital market participants who want to hold that investment long-term,” Greenway chief executive Peter Martin explained.

“It’s no different to a diversified share portfolio. They’ve got diversified access to residential real estate via these contracts,” he added.