Last week, it came to light that Australian Retirement Trust, the country’s second-largest super fund, has defaulted on AUD$457 million of debt linked to a US office building once occupied by Microsoft. At the time of purchase (pre-COVID, when the building was full of Microsoft staff), it probably looked like a great deal. Since then, interest rates have risen, and the office market has changed dramatically.

What lessons can HNW investors take from this?

• Don’t beat yourself up. I see clients who lose money on an investment and give themselves a hard time. Remember that everyone makes mistakes. The key is to understand what went wrong, learn from it, and aim not to repeat it.
• Risk management matters most. This was not simply a property deal gone wrong. It was a debt deal that came undone in a higher interest rate environment. The real risk was not the building or even the tenant, but the leverage behind the scenes. Once Microsoft moved out and valuations fell, it was the debt holders who bore the brunt. For me, this is a good example of why I remain cautious on private credit (you can read more on my views here).
• Private assets are complex. Direct investing in unlisted property or private deals isn’t as easy as it looks. Structures, leverage and valuations can all create hidden risks.
• Don’t blindly follow “big super”. Even the largest super funds make mistakes. I often see investments promoted in the wealth space on the basis that “big super is involved”. That’s not enough. Managing risk, doing the work, and thinking independently is what protect wealth.
• Super funds have unique challenges. They absolutely have a role to play, but there are risks. ASIC has already warned about weak valuations in unlisted assets. Add in regulatory pressures like the performance test, and decisions may be influenced by more than just investment merit.

For me, this is a good reminder that no investor is infallible, no matter how large or well-resourced. The lesson is not to avoid risk altogether, but to understand it. As high-net-worth investors, we have the advantage of being nimble and thoughtful in a way that big super funds cannot always be. The best safeguard is a disciplined process: question assumptions, manage risk, and always keep learning from mistakes, both yours and others.

Kind regards,

Shelley Marsh
Outsourced Chief Investment Officer (OCIO) & Founder
Wealth Differently

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