While much ado is made of the science that goes into fund manager research, real assessment puts comparable weight on the art as well according to investment leaders.
While financials and materials dominated trades leading into 2024, the popularity of other sectors like healthcare and information technology followed generational, and even demographic, lines.
Supply chains normalising, but labour still problematic for private debt purveyors
Private lenders are still dealing with the after effects of the pandemic and the damage it caused to supply chains in the building industry, but labour supply remains the key issue according to Phil Green, founding partner at multi-strategy investment manager Alceon.
Green, whose group invests in lending across real estate, private equity, credit and liquid strategies across Australia, said many of the supply chain issues have been alleviated in the last year as restrictions have eased in the wake of the pandemic, making construction on major projects significantly easier than it was in the preceding 2 years.
Broader economic problems in the Australian labour market, however, and specifically in construction, still persist.
“I don’t think the labor market’s normalised,” Green (pictured) told the audience during a fireside chat at The Inside Network’s Alternatives Symposium in Melbourne.
“Generally, the supply chain is improving, there’s no doubt about that. And some of the costs are going down or flatten have leveled out,” he said. “But I think availability of skilled labor is still a big issue.”
The pandemic’s broad effects still linger across the major construction projects that private equity players deal in, Green said, with a significant time lag embedded across the sector.
“Development timeframes [have] been the big change post COVID,” he explained. “I don’t think there’s a development that we’ve seen that’s not taking at least six months longer than what was originally contemplated.”
Timeframes have “blown out” from 18 months up to 30 months, Green revealed, which is pushing backers like Alceon to change the direction of projects they back.
“If it’s a construction of a multi level apartment building, then the builders capacity to deliver critical. That’s why in the last two years, we’ve done a lot more land subdivision than we’ve done high rise; construction risk is much lower,” he said.
While difficulties in the labour market are a leading factor in this, he said, and supply chain issues do still exist, a more frustrating contributor to development timeframes is the lack of expedience in getting statutory approvals on projects.
“It’s just crazy,” he said. “I mean, [the delay] is just inexcusable, in my view. It’s just ridiculous. Just non responsiveness, whether it’s people working from home or half as hard as they should be…”
Nevertheless, the investment stalwart sees the economy holding up well, and the market for private debt likely to provide fertile ground in the short to medium term.
“In that most a lot, my lifetime or business life would have been a fantastic environment for for growth and for investment opportunity. So I don’t think anyone should be too scared in the medium term,” he said. “There’s bound to be some more disruption over the next 12 months, or 18 months or maybe even two years… but I think I’m as surprised as Philip Lowe as to how resilient the economy is at the moment, and particularly in the residential market.”
