Alternatives Outlook 2024 Report

KEY THEMES

OPERATIONAL RESILIENCE TO HEADWINDS 01

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NAVIGATING NEW FUND FORMATION: CAPITAL VS ASSETS A reasonable number of investment managers ran capital raising processes for funds with alternative asset mandates in 2023. Many found it difficult to raise capital without identified and secured acquisitions. Those that did raise capital are increasingly under pressure to prove their ability to grow portfolios beyond seed assets. This chicken versus egg conundrum continues to impact new entrants to the Australian alternatives sectors given the scarcity of quality and large-scale acquisition opportunities across most alternative sectors. As a result, we believe

LIVING SECTOR APPETITE CONTINUES TO SURGE

SENIOR SECTORS GAIN MOMENTUM Inquiry into senior living continues to grow as investors seek to leverage off Australia’s aging population profile whilst simultaneously finding opportunities in sectors that match rising return expectations. Additionally, the senior living sectors offer opportunities with immediate exposure to income through operational asset acquisitions within more mature sectors such as retirement living and MHE. This contrasts to newer living sectors such as BTR and co-living where development led opportunities remain the primary entrance point at present.

Despite ongoing economic headwinds, many alternative sectors have demonstrated strong resilience, proving less vulnerable than several core sectors that are simultaneously grappling with structural shifts. For example, while the rising cost of living posed a raft of economic challenges in 2023, particular alternative sectors such as manufactured housing estates (MHE) and senior rental assets have showcased robust operating performance as a result of their affordable nature. Furthermore, the essential nature of services such as education, healthcare and aged care assets have supported the medium to long term outlook on investments despite current short-term pressures on operating margins.

Within the alternatives realm, living sectors continued to witness strong investor interest in 2023, both on a local and global scale. Low supply across the broader residential market further bolstered the current investment case for Australian living sectors with operational performance of complete assets exceeding expectations in many instances. Build-to-Rent (BTR) remains the focal point of the living sectors with the Australian BTR sector gaining several new participants in 2023 including Charter Hall, Brookfield and Stockland leading to over 20+ institutional managers now active in the sector.

strategic joint ventures or consolidation amongst major players is likely in 2024.

| AUSTRALIA ALTERNATIVES 3

CUSHMAN & WAKEFIELD