Joss Engebretsen

Barwon Investment Partners says the proposed changes announced in the Federal Budget would be a net positive for the Barwon Disability Accommodation Fund (BDAF) and the broader Specialist Disability Accommodation (SDA) sector.

Joss Engebretsen, Portfolio Manager of BDAF points to three areas where the announced measures, if legislated, work in the fund’s favour.

The proposed removal of the 50 per cent CGT discount on established residential property, and the restriction of negative gearing to new builds will change where investor capital flows. Barwon estimates tens of billions in annual investment previously directed to established, negatively geared housing may need to find a new home.

SDA is well placed to receive some of that capital. SDA properties that are well located, and strongly occupied are cashflow positive and receive substantial depreciation benefits. This means income distributions have very low, or even nil, taxable components in the early years.

The 30 per cent minimum trust tax announced in the budget applies to discretionary trusts only.

Joss Engebretsen said “The proposed changes in the budget will change the numbers on investing in established residential property for a lot of investors.

“Should they be legislated, the capital that was going to negatively geared housing must go somewhere else. SDA offers investors access to cashflow positive properties supported by government-sponsored, inflation-adjusted rents, and high depreciation benefits that retain much of the tax advantages held before these changes offering an increasingly attractive after-tax return compared to other investments.

He added, “BDAF is a fixed unit trust, and so the new minimum tax on discretionary trusts does not apply at the trust level here. Given very high proportion of tax-deferred income in our quarterly distributions, investors were already in a good position, and that has only become more attractive if these measures go through parliament. The budget headlines around trust taxation are not our story.”

The Government’s NDIS reforms target community participation spending and participants with higher functional capacity who can live more independently and have lower reliance on the NDIS overall.

Neither area touches the SDA cohort. In a recent National Press Conference, Minister Butler outlined a series of measures to make the NDIS more sustainable for who it was originally intended.

In post briefing Q&A highlighted that accommodation support for participants, amongst other essential services provided to those with extreme functional impairment and very high support needs, were not the focus of these measures.

SDA is approximately 1 per cent of total NDIS expenditure and operates on a separate funding track. The participants it serves are those with the most significant and permanent disabilities, and are not the target of eligibility tightening. Unmet demand for SDA nationally currently exceeds 9,500 places.

Barwon has argued for some time that the SDA sector is safer under a more financially sustainable NDIS than under one which has ongoing political pressure from unchecked cost growth. The Government’s commitment to bringing expenditure growth from 10 per cent per annum to 2 per cent over four years, while explicitly protecting the highest-need cohort, is consistent with that view.

The post Budget tax changes to drive capital toward SDA appeared first on AdviserVoice.

The Barwon Global Listed Private Equity Fund Access Fund is a feeder fund investing in units of the Barwon Global Listed Private Equity Fund (Underlying Fund).

Since its inception in 2007, the Underlying Fund has been strategically positioned to capitalise on the growing momentum toward alternative assets. This approach reflects the increasing investor preference for this asset class and is well-positioned to benefit from the widening divergence between public and private markets.

Further demonstrating strong performance, the Access Fund delivered annual returns of 29.6% per cent for the year ending September 2024, significantly outperforming the Underlying Fund’s benchmark, the MSCI AC World Small Cap NR Local Index.

Bob Liu, Portfolio Manager of the Access Fund and Underlying Fund says, “our outlook earlier in the year predicted a positive investment climate and this ‘Recommended’ rating further supports this as we head into the new quarter.”

Liu added, “as an investment team our focus remains on delivering strong, risk-adjusted returns by carefully selecting high-quality private equity opportunities.

“With a fundamental bottom-up valuation philosophy, the Underlying Fund typically invests in 20 –25 securities, giving a strong potential to achieve considerable alpha over the medium-to-long term.”

In its review, Lonsec highlighted several key strengths of the management approach with Lonsec adding, “The Fund is managed by a collegiate team with a thorough investment process that aims to provide exposure to superior risk-adjusted returns in the listed private equity securities market.”

The Barwon Global Listed Private Equity Fund Access Fund is managed by Barwon Investment Partners, which also runs funds specialising in real estate credit and healthcare property. To date, Barwon Investment Partners has invested A$3.1 billion in capital for its institutional and wholesale clients in Australian and offshore.

The post Barwon’s strong PE performance endorsed by Lonsec rating upgrade appeared first on AdviserVoice.

Barwon manages circa $2.2 billion in Australian healthcare property assets and offers three specialised funds: the Barwon Healthcare Property Fund, the Barwon Institutional Healthcare Property Fund and the Barwon Disability Accommodation Fund.

The whitepaper identifies four key trends expected to drive the sector’s growth in Australia:

1. strong government healthcare expenditure
2. Australia’s growing and ageing population
3. technological advances, and
4. inflationary construction costs.

Tom Patrick, Head of Healthcare Property at Barwon Investment Partners, comments, “We view the sector’s strong fundamentals, combined with macro-economic tailwinds, leading to sustained and increased demand for healthcare property over the medium term.

“As we enter the next property cycle, we anticipate the systemic shift away from traditional property sectors such as office and retail, and into alternative property sectors, including the healthcare property sector.”

The healthcare property sector comprises of real estate assets occupied by healthcare operators such as medical centres, private specialist facilities, day surgeries, private hospitals, diagnostic imaging facilities and pathology laboratories.

In recent years, investor demand for healthcare property in Australia has increased. Healthcare properties typically yield resilient income streams. This is as they are generally subject to long term leases with inflation-hedged rent reviews, high credit quality tenants, low vacancy rates and significant tenant fit out co-investment.

The defensive nature of the sector has been especially highlighted in recent times as the world recovers from the COVID-19 pandemic and navigates the current macro-economic environment.

Patrick concludes, “The solid opportunities for growth present 2024 as an attractive entry point for investment into the sector.”

The post Barwon Investment Partners whitepaper details outlook for Australia’s healthcare property sector appeared first on AdviserVoice.