Cedric Fuchs is often surprised that more people do not appreciate the benefits the Australian superannuation system offers them – the opportunity to save long term in a secure and tax-advantaged environment that maximises the benefit of compounding.
Fuchs, the founder and executive director of property fund manager Charter Hall, came to Australia in 1987, at a time when the superannuation system was undergoing significant development.
“Money always follows assets that have a tax advantage, and in Australia that is housing and superannuation. I always thought I should maximise the money I put into super and that a self-managed fund would be a good vehicle for that,” he says
Fuchs was affected when the $1.6 million balance cap rule took effect in July but he is not complaining about it. He believes that some of the changes made by Peter Costello when he was Treasurer in the 2000s were too generous and unsustainable.
“Some people were pumping so much money into their funds they were turning it into a tax shelter. It was right to stop the madness,” he says.
“If it had gone on it would have cost the country too much. I am very happy to pay the additional tax and I am surprised when I hear otherwise from some of my peers. If you have had some luck along the way you should give back to society.”
Fuchs has had his share of luck. He launched Charter Hall in 1991 in the middle of Australia’s last recession – and what he calls a depression in the property market.
“After the sharemarket crash of 1987 people put their money into property as a safe haven. Over four years, 12 years of supply came onto the commercial property market. Then the whole thing came down.
“When we started there was no investment work. It was a terrible environment. We assisted the banks with workouts.
“We got lucky when someone called us to help IBM sell its campus in West Pennant Hills in Sydney. The company had spent $135 million on the site and they were looking to restructure.
“We helped them arrange a sale and leaseback with structured finance involving several European banks. The fee we got from that gave us some capital that we were able to use when things started to pick up around 1994.”
Charter Hall had its IPO in 2005 and hit the big time wen it bought Macquarie Group’s direct property business in 2010.
Fuchs says that throughout his career he has made time to attend to his personal finances. He says it is not hard to look after money but you have to give it time. People who are not prepared to put the time into understanding markets should outsource the job to an adviser.
He has tended to be fairly conservative with his SMSF portfolio, allowing time and compounding to do the hard work. Now that he is close to retiring his portfolio is defensive, with lots of fixed income and property holdings.
He invests in Charter Hall funds. He believes fund managers should invest in their own funds, so they have some “skin in the game”. Before he gives money to a fund he makes sure the manager is an investor.
He also has a family trust that takes a more aggressive approach to asset allocation, with more equity holdings and some alternative assets.
Fuchs is a sceptic when it comes to the boom in exchange traded funds. The boom is a product of the bull market and the product has not been tested through the full cycle.
“Too much of it is in the hands of the same type of investors. When people want to get their money back we could see prices gap down,” he says.