Australia-headquartered Russell Investments has "welcomed" the reform announcements by US President Obama to abolish the Foreign Investment in Real Property Tax Act (FIRPTA) in order to attract foreign pension fund investment into the US – flagging substantial new opportunities for direct property and infrastructure investors.
Russell recommends superannuation investors construct broad multi-asset portfolios designed to meet their specific investment objectives. Alternative investments are important components of this multi-asset approach.
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The potential abolition of FIRPTA tax prima facie "makes future investments in US real estate more attractive", according to Andrew Sneddon, managing director and portfolio manager, multi-asset solution, who adds that Russel is currently looking to "enhance" its range of multi-asset portfolios with allocations to direct property and infrastructure in the US as well as Europe and Asia.
Samantha Steele, senior research analyst, alternative investments, said, "While Australian institutional investors have long discussed the need to capture global property opportunities, it seems this tax announcement may be the tipping point which will see a more definite move offshore for many funds.
Steele added that super funds looking for investment opportunities in alternatives should now consider the "increased attractiveness of US property and infrastructure" in after-tax terms.
In late 2011 Russell released a report highlighting Australian investors were planning to increase their allocation to global non-listed property by as much as 34%. The groundbreaking research was conducted by Russell Investments, the Asian Association for Investors in non-listed Real Estate Vehicles Limited (ANREV) and the Australian Institute of Superannuation Trustees (AIST). Foreign tax drag was highlighted as a key deterrent for 43.6% of investors in the 2011 Survey, with many particularly cautious about the US.
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