Australian asset managers IFM Investors and ISPT have completed a merger following protracted discussions lasting well over 18 months.

The combination of the two organizations creates a diversified asset management business owned by a group of Australian profit-for-member industry superannuation funds, adding ISPT’s real estate funds to strategies covering infrastructure, private credit, private equity and listed equities.

Melbourne-based IFM Investors had approximately A$221.7 billion ($138 billion; €133 billion) in assets under management as of September 30, 2024, while ISPT had around A$21 billion as of June 30.

As part of the merger, former Dexus chief executive Darren Steinberg has been appointed the inaugural chair of IFM’s new real estate investment committee, with former ISPT chief executive Chris Chapple becoming IFM Investors’ global head of real estate.

IFM chair Cath Bowtell told PERE that ISPT was already targeting growth and expansion prior to the merger, looking to expand its client base and diversify the types of investments it makes.

“IFM is further ahead on that journey because we’ve already globalized… so to bring the two businesses together now means the investment that IFM has made can be leveraged across the property portfolio as well, so the owners wouldn’t have to build it twice,” she said, referring to the industry superfunds that comprise the shareholder base of both organizations.

“The priority is to bring the real estate investment team and other ISPT staff across and do a careful integration of [their business] into our business.

“In the first short while, it will be about building out the investor base and potentially bringing offshore investors into ISPT. Longer term, the opportunity to have offshore property assets, of course, will be on the horizon. We have networks of institutional investors around the globe, many of whom are interested in investing in the Australian property market.”

Bowtell acknowledged that a merger had been the subject of on-off discussions for several years, but said the time was ripe now given ISPT’s growth strategy and the fact that many investors are growing more interested in the overlap between infrastructure and property investment opportunities.

“Everyone talks about data centers, it’s kind of become a cliché already,” she said.

“But there are other things that are a bit less new. For example, around the seaports that IFM has invested in there are industrial estates that are developed, and within airports there are shopping centers to be developed. Bringing those two skillsets under one platform, it seemed like now is the right time to do that, to capitalize on the blurring of the boundaries between property and, in particular, social infrastructure.”

New business model

While many superfunds were on both firms’ share registers, there was not identical overlap.

ISPT was established in 1994 as Industry Superannuation Property Trust by AustralianSuper, Cbus Super and Hesta, before adding several other funds to its share register. Its largest standalone fund is the ISPT Core Fund, which manages A$17 billion of assets across a diversified office, retail and industrial property portfolio.

It also manages the A$2.5 billion ISPT Retail Australia Property Trust, the A$191.4 million ISPT Community Infrastructure Property Fund, and several mandates comprising A$383.7 million.

IFM Investors was founded in 2004 following a merger between the Development Australia Fund – a vehicle established by Australian pension funds to invest in infrastructure – and Industry Fund Services, a firm that provided investment advice and services to funds. It primarily invests through two open-end vehicles, the IFM Global Infrastructure Fund and the IFM Australian Infrastructure Fund, as well as other strategies in private credit, private equity and listed equities.

The two firms had different business models and governance structures prior to the merger, which sources previously told PERE could be challenging to marry.

ISPT has operated under a cost-recovery model up to now, charging fees to investors that cover any costs incurred throughout the year – whereas IFM is more commercial and operates a for-profit model, albeit with fees that are generally lower than many of its competitors.

Bowtell said a change to ISPT’s model to become more commercial “would have had to have happened” anyway if it wanted to grow and launch new products, but it will now move to a more traditional fee model under IFM’s management.

The other change has seen ISPT’s separate board, which comprised representatives from the industry superfund shareholders, disband.

Bowtell added that the merger was “a big step for the industry funds model,” helping IFM and its shareholders keep up with the “move towards larger and multi-asset-class managers” that is being seen across private markets.

“Our ambition is to be a global private asset manager invested across the four asset classes,” she said.