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MAY 2018

HESTA CIO Sonya Sawtell-Rickson on how the top-performing fund is transforming its investment structure

From strength





















02 3 OPPORTUNITIES IN THE PRIVATE MARKETS Barings’ Funds & Co-Investments (FCI) business invests in a range of opportunities including primary funds, co-investments and secondaries across traditional private equity, real assets and real estate. While we believe attractive opportunities exist across the entirety of this universe, there are three areas of the market where we see particularly compelling investment opportunities today: REAL ASSETS, the LOWER MIDDLE MARKET and EMERGING MANAGERS.




In today’s environment, uncovering value in traditional private equity can be difficult. At the same time, demand for commodities—oil, gas and certain base metals—and infrastructure— power generation, energy midstream and transportation—is strengthening. The market environment for investing in real assets is characterized by a combination of long-term, structural demand trends and near-term technological disruption that is creating potentially compelling opportunities for private capital. For instance, the shale energy revolution, driven by advancements in horizontal drilling and hydraulic fracturing, has redefined traditional oil and gas supply networks and led to billions of dollars of new investment across the energy value chain. Within power generation, once-dominant coal-fired plants are increasingly being displaced by highly efficient natural gas-fired and renewable generation units that have, in some instances, achieved grid-parity with conventional power sources. Of particular interest in the real assets space are co-investments and secondaries. There are fewer limited partners with the technical underwriting capabilities to execute real assets co-investments, and as a result, we see less competition for co-investments offered by real assets managers. Secondaries also offer an intriguing opportunity. The real assets segment of the secondary market is less developed and expertise in the space is not as broad-based as that across traditional private equity secondaries, which results in less competition for attractive real assets interests.

MAY 2018




Competition for attractive deals across traditional private equity is challenging as the level of dry powder remains high and fund sizes continue to grow, increasing pressure to put capital to work and pushing valuations higher in many parts of the market. Against this backdrop, we tend to focus on segments of the private equity market that we believe offer the most value for our clients, such as the lower middle market, or the lower end of the North American buyout market, which represents over 90% of businesses in the U.S.

Another area of differentiation is in the emerging manager subset. Emerging managers are generally closely aligned with their investors, as value creation within their first, second or third funds can build long-term enterprise value for their business. The potential benefits of emerging manager opportunities in an investor’s portfolio include:

We believe the lower middle market, broadly, has the potential to offer attractive value across market cycles. This highly diverse universe is composed of companies that specialize in niche areas spanning a wide variety of sectors and industries. Often, a general partner with market expertise and sound business execution principles can capitalize on these companies’ niche strengths to create significant value for investors.

Specialized operational or value-

• • • •

Strong general partner alignment Fewer distractions from legacy portfolio companies More targeted sector strategies creation capabilities that can potentially drive asymmetric returns

For these reasons, in addition to touching on a segment of the market where we see value (lower middle market), the right manager profile for this particular subset has the potential to produce very strong results.

THE BARINGS TEAM Barings’ experience investing in the private equity and real assets market dates back to 1991. During our 27 years investing in these markets, we have partnered with some of the world’s most sophisticated institutional investors in our funds and co-investments business. Today, we have a vast network of partners and industry relationships that we rely on to source and originate deal flow. As the needs of our clients have evolved, we have been able to offer customized solutions designed to meet their private market goals and objectives. This article is for use with investment professionals for informational purposes only and does not constitute any offering of any security, product, service or fund, including any investment product or fund sponsored by Barings, LLC (Barings) or any of its affiliates. The information discussed by the author is the author’s own view as of the date indicated and may not reflect the actual information of any fund or investment product managed by Barings or any of its affiliates. Neither Barings nor any of its affiliates guarantee its accuracy or completeness and accept no liability for any direct or consequential losses arising from its use. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. An investment entails the risk of loss. 18-472022 LE ARN MORE AT BARINGS.COM








HESTA has returned 8.8 per cent over 30 years, so why has it undertaken major changes?

Principal Global Investors Australia cites benefits of gender diversity among staff.


10 ROUNDTABLE Investors discussed the rise of China and the addition of A-shares in MSCI indices.

20 GLOBAL INVESTING Morningstar’s global investment head says multi-asset funds have an edge.

22 PROFILE Mine Super’s new mindset is helping it make the most of change.



27 LIFESKILLS legalsuper members benefit from a long-term partnership with OnePath Life.

28 STEWARDSHIP Investors are focusing on human rights and supply-chain risks but more must be done.

30 WOMEN The industry needs to help preserve the increase in the SG for gender equity.



“A merger would have to stack up as a business case, and we can’t reduce our current services to members.” GEORGE FISHLOCK | CHAIR | AVSUPER

Profit-for-member funds can improve retention by offering help navigating red tape.


24 CHINA V THE US Geopolitical expert Stephen Kotkin warns investors not to get caught in the crossfire.

The Australian Asset Owner Stewardship Code will offer guidance and accountability.







Jean-Paul Pelosi HEAD OF DESIGN

A LETTER from the editor


Kelly Patterson ART DIRECTOR

Suzanne Elworthy SUB-EDITOR


Matt Fatches


Colin Tate

S I’M WRITING this editorial, Terry McMaster, head of Dover Financial, one of the biggest financial planning groups in the country, has collapsed in front of Commissioner Kenneth Hayne. It’s a rather dramatic moment at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry but, in my mind, no less dramatic than the admissions over the last few weeks that financial services firms have deliberately misled clients, opened accounts for deceased people and charged consumers for products and services they did not receive. And we wonder why the financial services industry has a trust issue. But drama aside, what I’m more interested in is what the fallout is going to be, what the response by these important Australian institutions will be. Let’s face it, we all need the banks (and AMP) to thrive – for our super fund investments and our home loans, if nothing else. This royal commission is the catalyst for change. Now is the time for the superannuation industry to be thinking about how it wants these institutions, and the processes and behaviours of their employees and boards, to change. What does alignment of interests look like? What does good governance look like? What do good

MAY 2018

partnerships look like? What does putting the client first look like? Super funds can vote with their feet through listed company AGMs, but to effect a more systemic change, they can also insist on conducting business with these institutions in a different manner. With all good relationships, change comes from both sides, so maybe this is also a good time for super funds to be looking at their own internal processes and behaviours. From a super fund point of view, what does good governance look like? What do good partnerships look like? What does putting the member first actually look like? How will you react when up on the stand in front of Hayne? Our cover story this month looks at one fund, HESTA, that has embraced change. From a strong position, including very good long-term returns and high member satisfaction, it has taken on a transformational change project with the sole purpose of doing things better for members. Perhaps unintentionally, many practices in our industry are an appeal to tradition – that’s the way it’s always been done. But I propose that the world has moved on and there is a better way of making more efficient decisions, allocating capital and reducing fees. Super funds need to embrace such change.


Karlee Samuels (02) 9227 5721, 0420 561 947 BUSINESS DEVELOPMENT MANAGER

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ADVISORY BOARD MEMBERS Debbie Alliston, head of multi-asset portfolio management, AMP Capital | Richard Brandweiner, chief executive, BTIM Australia | Peter Curtis, head of investment operations, AustralianSuper | Joanna Davison, chief executive, FEAL | Michael Dundon, chief executive, VicSuper | Kristian Fok, chief investment officer, Cbus Super | Robert Goodlad, chief executive, CIMA Society of Australia | David Haynes, executive manager, policy and research, Australian Institute of Superannuation Trustees | Geoff Lloyd, chief executive, Perpetual | Graeme Mather, head of distribution, product and marketing, Schroders | Mary Murphy, chief digital officer, First State Super | Paul Newfield, senior investment consultant, Willis Towers Watson | Nicole Smith, chair, MLC Superannuation Trustees | Anne Ward, chair, Colonial First State and Qantas Super | Nigel Wilkin-Smith, director portfolio strategy, Future Fund


LET’S ALWAYS PUT INVESTORS’ NEEDS ABOVE OUR OWN. LET’S MEASURE UP. Our society will reap the benefits when we make investing more transparent and client-focused. At CFA Societies Australia, we advocate for business models based on outcomes that are good for investors, not just outcomes that are good for us. Demand the best. Demand a CFA® charterholder. Get started at

© 2018 CFA Institute. All rights reserved.

MAY 2018



OMETIMES CHANGE IS hard to swallow. This is especially true when there is nothing wrong, so to speak. In organisations whose business is managing superannuation assets, change seems to be a particularly hard concept to embrace. But across all industries and all pursuits, the bestperforming businesses and individuals are in constant evolution. HESTA, the $43 billion fund for health and community workers, has performed well. It has served its members, generating 8.82 per cent since its inception about 30 years ago. The fund is one of the more established in Australia and grew up in the old-school industry fund era, with a strong focus on its members, who are mostly women and low-paid workers. In 2015, Debby Blakey became chief executive, when Anne-Marie Corboy left the fund after 16 years in the top job. Under Blakey’s reign, HESTA has embraced change, including a fundamental look at its investments. This began about 18 months ago, with a project of transformational change led by Willis Towers Watson, developing groundup investment beliefs and an examination of what would drive the fund’s competitive advantages and governance framework. An investment committee was the established 12 months ago, and former head of the Future Fund, Mark Burgess, was appointed independent chair; previously, HESTA had never had such a committee, with the whole board performing this function.

MAY 2018

In more change, Angela Emslie, who has been on the board for 24 years and chair of the fund since 2010, will step down at the end of her term. The final piece of the investment puzzle was to choose a new chief investment officer; Sonya Sawtell-Rickson, former investment director at QIC, was appointed last July.



BIGGER BET TER HESTA has been a high-performing fund, generating 8.8 per cent over the last 30 years. Now with rapid growth ahead, it’s re-inventing its investment capability to take advantage of its EVOLVING STRENGTHS. By Amanda White + Photos Mark Dadswell

“The world has evolved materially and we thought our success in the future would be based on different things than in the past,” Sawtell-Rickson says. “Scale will allow different opportunities and my job is to help implement that. We are still very much focused on members.” The fund is expected to grow to $100 billion in the next couple of years.

Sawtell-Rickson’s role is to look at the whole investment management function, which up until now has been mostly external and organised around siloed asset-class functions. “My role is to turn strategy into action. We had a blank sheet of paper, which was one of the exciting things for me in joining,” she says.

MAY 2018




TOTAL-PORTFOLIO APPROACH The team identified a number of things it wanted to address. The first, and arguably the most important, was to reorient the business to a total-portfolio approach. Many large funds use this model to great success, notably world-class organisations Canada Pension Plan Investment Board, the Future Fund and New Zealand Super. Willis Towers Watson global head of investment content Roger Urwin, who led the transformation with HESTA, says there are benefits to a fresher approach to capital allocation. “Mandates are subject to tracking error but that is not the risk the fund is really interested in,” Urwin says. “Total portfolio management is worth about 50-100 basis points [above] strategic asset allocation.” A move to a total-portfolio approach (TPA) has meant reorienting teams away from asset classes. Sawtell-Rickson says the advantages of this include the ability to be more agile with opportunities, and flex up and down the risk curve. “As an example, we didn’t want an Australian equities manager playing a theme we thought was meaningful but that didn’t get out of the asset class and so didn’t affect the total portfolio,” she explains. “We have changed the way we approach ideas so we can get to the totalportfolio level. For that, you need the right benchmarks, incentives and behaviours.

CULTURAL SHIFT “The core of TPA is a mindset and cultural shift. The first step is to get people to understand the case for change.” To that end, monthly strategy forums have been introduced where the whole team is part of the conversation. “These meetings differentiate between strategy and risk. They enhance idea generation and encourage action across asset classes,” Sawtell-Rickson says. “We are focusing on harnessing our collective intelligence – how can we do things better, differently and be more adaptive.” As part of the cultural shift, the fund will introduce incentive pay for the first time. While the specifics are yet to be determined, it will apply to the senior investment team and be focused on the total portfolio. “This is an area of focus for industry funds and we’ve taken it seriously and carefully. But we’re in a competitive market

MAY 2018

We have changed the way we approach ideas so we can get to the total-portfolio level. For that, you need the right benchmarks, incentives and behaviours

and would end up paying higher bases if we didn’t pay incentives,” she says. Similarly, benchmarks are being reviewed, with a move away from static strategic asset allocation and more towards deciding how much risk the investment committee wants to take on. (The Future Fund uses equity beta and bond beta. HESTA will use a similar concept.)

SPACE FOR IDEAS, RESEARCH HESTA is still a small organisation and the agile decision-making this allows is not lost on Sawtell-Rickson. Her focus is on improving alignment, building collective intelligence and contributing to the deal flow, all with the purpose of better outcomes for members. “As a woman in finance, having a membership that is 80 per cent female is very special,” she says. “It’s wonderful having the one purpose – solely to produce strong investment returns to members.” Under her leadership, HESTA will launch a research and innovation lab where all ideas can be captured and the team will vote on them. The priority ideas will be those that have conviction, are measurable and actionable. There will also be longer-term research priorities, with themes such as climate change, demographics and long-term investing. “The ideas can come from managers or internally and we’ll use them in a practical way; for example, [we’ll ask if we] can amplify trades that managers are doing or if there’s a theme more broadly on one of their trades,” she

says. “It’s around differentiating ourselves in the investment market – how can we be a strong and respected partner, and articulate our thinking and edge clearly.” One of the research pieces being undertaken is called “level playing field”. This will compare, for example, unlisted real estate, high-yield debt and insurance opportunities. “We can be nuanced and timely with how we approach that. We can make strategic decisions every day,” SawtellRickson says. TPA is one of four workstreams Sawtell-Rickson has been driving. The others are long-horizon investing, the investment value chain, and the investment operations and internal model. HESTA employs 17 investment professionals. With its ambitious growth plans, it expects to double this over the next 12 months; in particular in quantitative analysis, research and execution. The fund is also in the market for a new general manager of quantitative solutions and risk, and will add top-down risk analytics to the team. Sawtell-Rickson will then have four general managers reporting to her: Andrew Major, who looks after unlisted assets; James Harman who is responsible for listed; Gary Gabriel who is in charge of strategy and risk; and the new quantitative solutions general manager. Underneath that structure, there will still be investment managers who specialise in asset classes, but the focus will remain on the total portfolio. “Part of the challenge is how we bring them together; the listed markets skillset


is different to the unlisted,” she says. Dynamic asset allocation is a daily process, in which the team looks at where the markets have moved and makes decisions around that. Unlisted assets, however, are more medium to long term and it’s more difficult to make decisions around market movements. “As a broad principle, we don’t have a skill edge in predicting markets over 12 months,” Sawtell-Rickson says. “Our forward-looking valuations over three to five years are more predictive, and we have an advantage with our patient capital.”

PATIENCE PAYS Long-horizon investing has been identified as one of the advantages of the fund, and Sawtell-Rickson says it provides unique opportunities. The most obvious of these is the illiquidity premium, which doesn’t just mean allocating to unlisted and other long-term investments; the fund also can

be a provider of liquidity and access sellers and buyers of assets at different points in the cycle. “We are challenging ourselves to think about some of the structural things in the investment chain,” Sawtell-Rickson says. As an example of this, she points to infrastructure and whether direct investments, and more evergreen exposures, make sense.

ENGAGEMENT, ALIGNMENT The fund is also focusing on better alignment of its investment managers and other agents to the long term. Last year, HESTA’s engagement partners – the Australian Council of Superannuation Investors, Regnan, and Hermes EOS – conducted 464 meetings with companies. HESTA is encouraging its investment managers to elevate engagement as a priority. The fund is also looking to work with managers differently. And while there is no set target for internal management,

the fund buys into the potential improvement in alignment, costs and insight that in-house work can bring. HESTA has 81 manager relationships. “We want to re-craft our partnership engagement,” Sawtell-Rickson says. “We want fewer and deeper relationships, and to be an investor of choice.” HESTA also wants to leverage its scale on costs. “We want to make sure where there is scale it is being used as operating leverage. There has been profit capture on the partner side as FUM has grown. We want to take a fresh look at that. “We want to work with managers to develop improved fee models, which reward strong performance, long-term partnerships and member alignment – with a focus on not inappropriately leaving cost on the table. HESTA has differentiated itself through its incredibly strong purpose and unique membership and we are looking for alignment through agents and partners who want to share in that.”


WHAT ROLE DO BONDS PLAY IN A PORTFOLIO? Expand your knowledge of fixed income and the global markets with Market Intelligence Since the evolution of the modern bond market, investors have used bonds as a way of diversifying their portfolio, generating income and preserving their capital. Some even use the bond market as a capital appreciation tool. THE ROLE OF BONDS IN A PORTFOLIO Investors include bonds in their investment portfolios for a range of reasons including income generation, capital preservation, capital appreciation and as a hedge against economic slowdown. DIVERSIFYING WITH BONDS Bonds are considered a defensive asset class because they are less volatile than other asset classes such as shares. Many investors include bonds in their portfolio as a source of diversification to help reduce volatility and overall portfolio risk. TO EXPLORE MORE FIXED INCOME FUNDAMENTALS VISIT PIMCO.COM.AU/MARKETINTELLIGENCE Issued by PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246862 (PIMCO Australia). This publication is intended for general advice only. It has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation and needs. All investments carry risk and may lose value. To the maximum extent permitted by law, PIMCO Australia and each of their MAY 2018 directors, employees, agents, representatives and advisers disclaim all liability to any person for any loss arising, directly or indirectly, from the information in this publication. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. © PIMCO, 2018.






CHINA By Sally Rose + Photos Matt Fatches

The addition of A-shares in the MSCI Emerging Markets Index puts the Asian giant’s mainland markets on everybody’s radar. Local investors gathered recently to discuss how they plan to add exposure.

MAY 2018

THE ESTABLISHMENT OF Shanghai-Hong Kong Stock Connect and Bond Connect, and the inclusion of China A-shares in the MSCI Emerging Markets Index, have provided new opportunities for international investors to access Chinese exposures. Despite this, and China’s status as the world’s second-largest and fastestgrowing economy, the nation’s equity and fixed income markets remain underrepresented in the portfolios of many global asset owners. Increasingly, however, some of the world’s most sophisticated asset owners and managers are moving to add to their direct exposures to China. With China A-shares’ weighting in the MSCI Emerging Markets Index set to rise gradually, institutional investors around


the world have more reason than ever to ensure they understand the market and the role Chinese equities play in their portfolio via indirect exposures. How Australian institutional investors are approaching Chinese markets was the topic of discussion at a recent investor roundtable hosted by Investment Magazine and sponsored by HSBC Asset Management.

FIRST STATE SUPER A PIONEER In 2017, First State Super became one of the first Australian institutions to be granted a Renminbi Qualified Foreign Institutional Investor (RQFII) licence by the Chinese Government. This means the fund is permitted to trade directly in the mainland Chinese equity markets. First State Super senior investment analyst Hui Henry Zhang, who is responsible for overseeing the China exposures in the $85 billion industry fund’s portfolio, said it was strange that most global institutional investors didn’t actively allocate to China. “We think China can offer something quite different from the rest of the world and has some very good talent,” Zhang said. “Now we have to think more strategically and are spending some time on understanding the emerging markets

within it [by sector] and also emerging regions, such as Western China.”

A CASE FOR INVESTMENT The Future Fund decided a number of years ago that MSCI including China in its emerging market indices would trigger a review of its China exposures. “We’ve now gone through the beginning of an exhausting exercise where we have sort of made a case for…us to explore further and turn over all the blocks when it comes to A-shares,” Future Fund head of emerging markets Craig Thorburn said. “China is at the centre of my life because it is the leading centre of emerging markets, but quite frankly it is also probably becoming the leading centre of global capital markets, full-stop.” Over the next three to five years, Thorburn will be focused on helping the Future Fund gain a deeper understanding of how it can access China. “It’s a very volatile market and, as we saw in the crash of 2015, there are some aspects of institutional markets we take for granted in the rest of the world that don’t apply in China, and by that I am referring to the ability of companies to pull the pin…So we remain very cautious,” Thorburn said. “And up until recently, in a nutshell, we’ve had concerns about it being

PA R T I C I PA N T S KUEK CHYUAN (KC) LOW Senior consultant, Frontier Advisors EDWIN LO Senior portfolio manager, Christian Super BILL MALDONADO Chief investment officer Asia-Pacific, and global CIO, equities, HSBC Global Asset Management LESLIE MAO Senior investment consultant, manager research, Willis Towers Watson ANDREW THOMAS Head of strategy and growth assets, group investments, QBE Insurance CRAIG THORBURN Head of emerging markets, Future Fund DONG WANG Chief executive, HSBC Jintrust Fund Management Company ZHEN WEI Executive director and head of China research, MSCI ANNA WEICKART Senior portfolio manager, equities, Cbus Super

DONG WANG Chief executive, HSBC Jintrust Fund Management Company

HUI HENRY ZHANG Senior investment analyst, First State Super

CH A IR AMANDA WHITE Director of institutional content, Conexus Financial

BILL MALDONADO Chief investment officer Asia-Pacific, and global CIO, equities, HSBC Global Asset Management

MAY 2018




a Ma-and-Pa retail market.” He notes that more than 86 per cent of China’s mainland sharemarket is owned by retail investors who “like a punt”.

GROWING SOPHISTICATION HSBC Global Asset Management chief investment officer Asia-Pacific, and global CIO equities, Bill Maldonado said that, while it was true that China was historically a retail market, this is changing more than most people outside the country realise. “The institutionalisation of China is happening and I think is evident in the way corporates are prepared to interact with investors with respect to discussing their business plans and ESG,” Maldonado said. He explained that a growing proportion of Chinese mutual funds, which have traditionally represented groups of retail investors, now have a mix of local and international institutional backers. Willis Towers Watson senior investment consultant, manager research, Leslie Mao, recently relocated to Sydney after spending

12 years working out of Willis Towers Watson’s Shanghai office leading a team researching Chinese equities. He was one of the advisers to First State Super as it entered the Chinese market. Mao said he had observed retail Chinese investors become much more sophisticated in recent years. “They care about fundamentals, but they also tend to overreact, which is actually a really nice thing for institutional investors, because it creates buying opportunities. That’s when you tend to get tremendous value on top of the overall marketplace.”

CBUS LOOKS TO ASIA Cbus Super senior portfolio manager, equities, Anna Weickart, said the $47 billion industry fund was in the process of doing due diligence as it searches to appoint a manager for a new mandate in Asia ex-Japan equities. The fund already has exposure to some of China’s largest and most

successful companies listed in Hong Kong – such as Alibaba and Tencent – via its global fund managers. And as China A-shares are incorporated into the MSCI indices, it will be these types of large-cap companies that are included first, Weickart noted. “What we’re really looking for is a manager who can give us exposure to China’s domestic growth story…a lot of which will come from the small to mid-cap part of the market, so we are looking to appoint an all-cap mandate.” Weickart said Cbus was still exploring accessing China A-shares directly, further down the track. “A lot of organisations and fund managers seem to be going the way of using Stock Connect, probably more than a QFII licence, but I suppose we are just a little bit cautious,” she said. “We’ve still got some concerns about how it will function if there is some kind of crisis.” HSBS’s Maldonado said he understood that the volatility of 2015 was still fresh in investors’ minds but noted that it had also served as a catalyst for major improvements in the way the Chinese sharemarket is regulated. He argued it would be worth it for investors to put the effort into doing the necessary due diligence to invest in China now. “If you wait until the market is fully matured, then it won’t be the kind of alpha market it is today,” he said.

MSCI CHANGES THE GAME ANNA WEICKART Senior portfolio manager, equities, Cbus Super

CRAIG THORBURN Head of emerging markets, Future Fund

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Visiting Sydney from Beijing, MSCI executive director and head of China research, Zhen Wei, said his team worked closely with regulators throughout the three years leading up to the announcement about China A-shares inclusion in the emerging market index. MSCI faces a massive challenge now in implementation. Add too much too soon and it could artificially ramp the market. Wei said the company is very conscious of that risk and is in discussions with various stakeholders to prevent any market distortions. “It is important to us to make sure that all parties involved understand how this can work and, of course, from the regulators’ perspective, we want to make it a very smooth experience – we don’t want another August of 2015,” he said.


LOCAL PRESENCE The HSBC Jintrust Fund Management Company is a joint venture between HSBC Global Asset Management and a local Chinese funds-management firm. “We are the only truly Chinese asset managers who are managing onshore money for onshore clients and also advising offshore clients,” HSBC Jintrust chief executive Dong Wang said. The Shanghai-based Wang said he believed the China-A sharemarket would prove more “steady” and “fruitful” than many offshore investors anticipated. He observed that it was difficult for many people not familiar with China to appreciate just how rapidly its capital markets are developing. Wang said the Chinese regulators were “very hands on” and “want to make everything work better”. He noted that for those investors who spoke the local language, or had access to good interpreters, most information was publicly available or could be requested. MSCI’s decision to include China A-shares signals to the outside world it needs to start doing something about getting an exposure to China, Wang said. “If one thing is for sure, it is that the market is growing and opening up; it’s coming, and we are just at the very first stage,” Wang said. “China is a very different market…and the transition and growth of the past five years has just been amazing. I don’t think anyone expected that to happen so quickly, so just be patient and watch and learn the market.”

CAUTIOUS APPROACH Frontier Advisors senior consultant Kuek Chyuan (KC) Low said most of the asset consulting firm’s clients were still accessing China via broader emerging-market strategies. “Some clients are now looking for a China-specific strategy, but we are still reviewing the best way to access that,” Low said. Given the outperformance of the MSCI China Index over the last year, Frontier now has a preference for A-shares in the short term, he added. Low said Frontier remains cautious about the operational, political and economic risks in China, but is heartened that government-led reforms are reducing


EDWIN LO Senior portfolio manager, Christian Super

We can’t deny the fact that the A-shares market is going to be a dominant force

the risks in all those areas. MSCI’s Wei noted that the demand for ESG reporting from foreign investors was set to drive positive changes in the Chinese market. QBE Insurance head of strategy and growth assets, group investments, Andrew Thomas, said it was inevitable that China would play a bigger role in the global insurer’s portfolio in coming years. “We can’t deny the fact that the A-shares market is going to be a dominant force,” Thomas said. QBE still has shorter-term concerns about transparency and corporate governance standards for A-shares that may force institutional investors to make a trade off between alpha and risk management. However, Maldonado said HSBC believes it has an offering that will keep investors from having to make that compromise. “We’ve managed to extract very significant alpha that you couldn’t get in other markets, without compromising

on portfolio construction, risk metrics or the investment process,” Maldonado said.

GOVERNANCE RISKS Christian Super senior portfolio manager Edwin Lo said the $1.1 billion faith-based super fund had increased its engagement with specialist Asian equity fund managers over the last three years and was now in the process of due diligence for selecting a manager to increase its exposure to Chinese shares. He is hopeful that a boom in infrastructure spending in China will create “a lot of adjacent growth opportunities”. Lo said the fund’s relatively small size made it impractical to apply for a QFII licence, and that he saw better opportunities to partner closely with licensed third-party fund managers. Concerns about corporate governance also make direct investing in China A-shares challenging for Christian Super. “As a pioneer in ethical and ESG investing, we are concerned that there may be some risks we need to understand more and manage better,” Lo said.

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THE NUMBERS FAVOUR WOMEN Several statistics show the tangible benefits of gender equity among staff.


INVESTMENT MANAGEMENT CONTINUALLY extolls the benefits of diversification. Yet, when it comes to how the industry staffs itself, that logic isn’t upheld. Women are underrepresented in the industry and it’s up to asset management firms to find a way to attract and retain more of them, for the good of clients, shareholders, and the industry. How’s this for a lack of diversification? Recent research from Mercer showed that 76 per cent of investment managers are male. Things are somewhat worse in Australia and New Zealand, where a 2016 Morningstar report shows that only 11 per cent of fund managers are women. The research demonstrates that women aren’t just underrepresented in funds management, they’re less likely to enter the industry than men, and more likely to leave it. The whole industry loses out because of this.

In Mercer’s study, 93 per cent of respondents said diversity and inclusion helped decision-making. The CFA Institute, a global organisation of investment professionals, points out that public companies with women on their boards have 3.7 per cent higher compound returns than companies with none. Similarly, companies with top-quartile diversity demonstrate 41 per cent higher return on equity than companies without. And women demonstrate higher conviction, greater patience, and lower turnover than male fund managers. This would demonstrate that women make more efficient long-term stewards of capital because they could limit trading costs and avoid portfolio churn. So how to add more women to the process (and the payroll)? We can begin by encouraging and supporting schools’ efforts to deliver the math and science training that will give potential portfolio managers and

aspiring analysts a solid base. Imagine if we got as creative developing mentorship programs to make young women aware of the industry as we do building portfolios, applying long-range strategic thinking that would attract the brightest minds for the strongest returns. Don’t underestimate what simple industry awareness can do to draw potential employees. It’s absolutely key. In Mercer’s research, 41 per cent of female university students said they didn’t know enough about the investment management industry to consider it for a career. Imagine what we could do with university partnerships, more robust internship programs and targeted social media campaigns.

A LONG-TERM HOME It’s also on this industry to cultivate a better long-term home for women and prepare them for more senior leadership positions. Partner young female employees with your company’s

Recent research from Mercer showed that 76 per cent of investment managers are male

MAY 2018

women in leadership through a mentoring program. Establish a ‘Women in Leadership’ council to increase advocacy for female advancement and to identify gaps that could be limiting women at your firm. My company has had success with a Women in Sales group, which creates a community within a community to share experiences, knowledge and ideas. Flexibility at work is important. De-stigmatising a flexible work schedule is even more important. When you see that nearly 80 per cent of women perceive a flexible work schedule as a career killer, it demonstrates the importance of an inclusive culture. These are areas where Principal has put in a concerted effort. Some of our portfolios have co-lead portfolio managers, which means two workers share equal responsibility for leading the strategy. This provides long-term flexibility and an effective base for work-life balance. It also provides diversity of thought in constructing and managing portfolios so that clients benefit from the best ideas our teams can create. It’s programs like this that have landed Principal on the Working Mother 100 Best Companies list for the 15th year in a row, recognising the firm’s efforts on flexible work and its importance in modern organisations. But awards aren’t the reason to tackle this problem. Women make up 51 per cent of our managers and executives, making significant contributions to our success. This is something a global organisation such as Principal does for the good of our employees, our clients, and our future.


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1800 230 099 1 IMPORTANT: Net rate calculated daily and paid in arrears for the month ended 31 March 2018 (net of fees, costs and taxes, assuming no reinvestment). Past performance is not a reliable indicator of future performance, which will be determined by the future revenue generated by the assets of the Trust. Trilogy Funds Management Limited ACN 080 383 679 AFSL 261425 (Trilogy) is the responsible entity of the Trilogy Monthly Income Trust (Trust) ARSN 121 846 722, a registered pooled mortgage fund issued pursuant to the Product Disclosure Statement (PDS) dated 1 September 2017. The PDS is available at and should be read in full, particularly the risks section, prior to making any investment. All investments, including the Trust, involve risk which can lead to loss of all or part of your capital. Trilogy provides general financial product advice only and recommends you seek personal advice from a licensed adviser on MAY 2018 the suitability of this investment to your objectives, financial situation and needs. Investments in the Trilogy Monthly Income Trust are not bank deposits and are not government guaranteed.



F U L L- S E R



George Fishlock has been chair of the $2.3 billion aviation industry fund AvSuper for the last five years. At the end of February next year, he plans to step down. He talks to Amanda White about why the fund is well positioned to accommodate its members.

MAY 2018


By Amanda White + Photos Mark Dadswell

Q: YOU HAVE BEEN A BOARD MEMBER OF AVSUPER SINCE 1999, WHAT DO YOU THINK ARE THE BENEFITS OF THAT CONTINUIT Y TO THE BOARD AND THE DECISION-MAKING? A: The biggest advantage, and one perhaps not realised by the regulator, is the corporate knowledge that has been retained. I can explain to another board member or staff member why something has arisen or a decision was made. Having said that, we equally recognise the need to regenerate and I’m planning to move on at the end of my term next year. We have a highly skilled and capable board with the skills and knowledge to go forward. I am very firm that you have to take the right time to move on, and the organisation is in the best position now. Q: YOU WERE AN AIR TRAFFIC CONTROLLER FOR ABOUT 34 YEARS. HOW DOES THIS IMPACT YOUR ROLE AS CHAIR OF THE FUND AND, IN PARTICUL AR, DO YOU THINK IT IS IMPORTANT FOR BOARD MEMBERS TO BE ABLE TO IDENTIFY WITH THE MEMBERSHIP? A: This is important because of the exclusive nature of our type of membership. We have one of the highest average member account balances of any fund in Australia and our members are all well-educated, highly competent and capable people. (The average balance is about $400,000 and in the closed definedbenefit fund, which accounts for about

40 per cent of the membership, the average account balance is $750,000). Our members are very conscious of superannuation and the markets. We had very little commentary after the GFC and a very small number of members withdrawing money or switching to cash, because they understood the situation and the need for long-term investing principles. Advice services are critical to our members and we have been focused on those services. Q: AS THE CHAIR OF A REL ATIVELY SMALL FUND, DO YOU HAVE A PARTICUL AR VIEW ON MERGERS AND HOW THE FUND CAN CONTINUE TO BEST SERVICE ITS MEMBERS? A: We are quite happy as a boutique fund because of our membership. We don’t need huge call centres, and we have only about 15 staff, so we have lower overheads. As the trustee, a merger would have to stack up as a business case, and we can’t reduce our current services to members. We would need to merge with a fund with a similar profile to make it worthwhile, and we are open to discussions. Also, high-balance members are prepared to pay a little more, as they value the services and the personal touch of our staff. We know our members by name, and some of them know the staff by name. It’s very personal. If we merged with a large fund and the services we offered members [became] part of a large call centre, that arrangement wouldn’t be an improvement for them.

MAY 2018




at every board meeting. We still have an offsite to do some naval gazing but we discuss important issues at every meeting. There are so many things to talk about you can’t do it in three to four hours; you have to do it throughout the year. Q: WHAT IS THE MOST IMPORTANT CONVERSATION YOU ARE HAVING AROUND THE BOARD TABLE THIS YEAR? A: Legislative changes, whatever they might be. We have a philosophy that we get on with it and do it. We were one of the first funds to get an AFSL, if not the first, and we were early adopters with RG 97. It is easy to make decisions at AvSuper and we can get them made quickly because we lack the bureaucracy other funds might have.

Highly skilled directors are in high demand, so independents will broaden the pool to choose from. We see value in it

Q: WHAT IS YOUR BEST PIECE OF ADVICE FOR HOW TO CHAIR A CONSTRUCTIVE BOARD MEETING? A: I have the best board in the world. They are highly skilled and their personalities all mesh really well. We have equal employee and employer representatives and have never had any angst. It’s a really easy board to chair. Each board member trusts the others, and we really trust our committees. I’ve had an easy run of it. I can thoroughly recommend the [Australian Institute of Company Directors] directorship and chairing courses. They teach some great techniques for managing meetings and boards. Q: WHAT IS YOUR VIEW ON THE

CURRENT DEBATE AROUND GOVERNANCE AND THE VALUE OF INDEPENDENT DIRECTORS FOR SUPER FUND TRUSTEES? A: This issue is not going away and we are not going to try to hold back the dam wall. There is nothing wrong with the current system but the independent model can work better. We have had a discussion

MAY 2018

around this and have made an application to [the Australian Prudential Regulation Authority] for an independent director model. We will probably end up with the 3:3:3 model. It is difficult to find the right skillset in board members and this will continue with the complexity of super. It takes a while longer before superannuation board members can be competent, compared with board members for corporations or not-forprofits. Highly skilled directors are in high demand, so independents will broaden the pool to choose from. We see value in it. Q: HOW HAVE YOUR VIEWS ABOUT WHAT MAKES A GOOD CHAIR CHANGED OVER THE YEARS? A: The board expects a lot from you as a chair. The chair becomes so responsible for setting the strategic direction and areas where focus is required. You have to think about where you want to go with the board. We have gone away from having a one-day offsite to talk about strategic issues and now focus on at least one strategic issue

Q: HOW WOULD YOU DESCRIBE YOUR REL ATIONSHIP WITH CHIEF EXECUTIVE MICHELLE WADE AND THE EXECUTIVE TEAM? A: Along with having the best board, I’ve got the best CEO in the country, too. Michelle and I talk two or three times a week and bounce ideas off each other. She is the best investment our fund has made. She has brought a vibrancy and fresh outlook to everything. She has a heavy customer-focused background and was one of the reasons we focused so heavily on our advice services. In the first board meeting she attended, she said “that’s the end of the paper copies” and gave everyone an iPad. She has built a team that are all Gen X and Gen Y. They are young and talented and very capable. Q: WHO ARE YOUR MOST IMPORTANT MENTORS AND WHOM DO YOU TURN TO FOR ADVICE NOW? A: I’ve learnt from our membership – but also in other capacities, such as when I was a ministerial appointment to the prisons – that there are people out there and members of funds who don’t understand super, are not financially literate, or not even literate in English. You can have members who don’t know what you’re talking about. Over the years, I’ve learnt we need to be a bit humble about what we’re doing and communicate in the best possible way. The best mentors are the people I have been exposed to who have given me that perspective.




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MAY 2018




MULTI-ASSET ty from n provide more safe ities. ca lio fo rt po a , ts nd equ ed marke In today’s overvalu turns if it extends its holdings beyo re downturns and flat

SEEK PROTECTION OR stay fully invested? That is the question. However you look at it, the nine-year bull market has many investors thinking. It is at these moments of inflection that behavioural biases can have their greatest influence on markets. Left unchecked, investors’ behavioural biases lead them to make irrational decisions, especially buying when a market is expensive and selling when it’s cheap. Investors are often fooled by strong recent returns, thinking they’ll continue. Similarly, investors frequently forget about their innate loss aversion; humans are inclined to dwell on further declines as downturns worsen, leading to pro-cyclical behaviour that often breeds poor financial outcomes. Supporting this rhetoric, empirical evidence implies that cheap assets have a far wider margin of safety than their most popular equivalents, with valuations directly influencing longer-term outcomes. It is important to acknowledge that cheap assets rarely have fundamentals that are perfect (think of Russia, the UK and the telecommunication’s sector), as they often carry significant uncertainty and are thus punished by negative investor sentiment. At the other end of the spectrum, expensive

MAY 2018

asset prices regularly surpass what fundamentals justify. The latter is the challenge we face now. Specifically, the US and Australian equity markets sit in the fourth quartile of valuations. This leaves much of the equity market universe vulnerable to sluggish returns at best, or a major downturn at worst, a development of which every investor should be wary. Let’s reflect on what this means. When the majority of assets are this expensive, should we simply fill portfolios with those few assets that are least popular? Or can a multi-asset approach help deliver better outcomes? In answering, it is critical to remember that asset allocation is the primary driver of long-term returns. Therefore, factors such as the equity/bond split, geographic allocation and duration levels will have a meaningful impact on outcomes. Related to this is knowing the limitations of our shorter-term predictive abilities. The reality is that financial markets carry significant levels of uncertainty at all times in the cycle and sound portfolio management is being positioned for a variety of outcomes, not just one. This is one advantage of a multi-asset approach over, say, an equity-only portfolio. While fixed income is similarly

By Phil Straehl + Jam

es Foot

(if not more) expensive, a multi-asset portfolio provides a better hedge against various potential economic and market outcomes. There are simply more levers to pull, including better risk controls and an ability to secure cash flows over a full market cycle. The last point to iterate is the concept of a margin of safety. When markets are unanimously expensive, we must appreciate that the margin of safety is lower than it would ordinarily be. This is problematic in an absolute sense, as the range of outcomes (reward for risk) becomes skewed to the downside. Therefore, when faced with such probabilities, it can become prudent to seek protection in cash, as it will help control our own behaviour and become effective ammunition against the increasing likelihood of an adverse outcome.

AUSTRALIA’S MARKET Turning to local market nuances, the same challenges apply. In fact, things could be considered even harder, given the concentration risks in Australia. It is important to establish the essentials. First, the Australian sharemarket represents only about 2.5 per cent of global markets. Second, while it faces valuation pressures similar to many of its Western peers, the range of outcomes tends to be quite wide due to the concentration



MSCI World Ex Australia S&P/ASX 300

35 30 25 20 15 10 5 0




Consumer Consumer discrectionary staples



Information technology

Telcom services


Real estate

Source: Morningstar Investment Management


Average Real 5-year Return (p.a.)


US UK Europe Japan Australia Average









Valuation Quartile Source: MSCI and Standard & Poor’s

issues. This is most prevalent among financials (inclusive of real estate) and materials, as these dominate the index exposure. The high level of cyclicality inherent in most of these sectors further exacerbates the nature of the risks. There are two ways to think about this underlying exposure. First, at an index level, the risks can become heightened

and this reinforces the importance of sound behaviour. One thing we know for sure is that chasing past performance is a dangerous path. However, by being contrarian, an investor can use the concentration risk as a platform for valuation-driven opportunity. In this regard, the Australian market remains unappealing compared with some investment opportunities available globally. By positioning a portfolio in

those areas displaying the most attractive reward for risk; a valuation-driven investor can reduce the cyclical bias and thereby add a cushioning effect on returns in down markets. This is a tool we are advocating to reduce the impact of any valuation shock.   What does this mean practically? Well, in our multi-asset portfolios, we retain some exposure to Australian shares despite the fact they rank poorly based on our valuation and risk models. This is also the case for US shares. However, we adhere to a bottom-up approach that considers markets on a more granular basis, with exposure to unloved countries and sectors, like UK equities and global telecommunications, that have become more attractive on an absolute and relative basis. Opportunities have similarly presented themselves in cyclical areas, such as emerging markets across both equites and debt; although we note the recent strong returns have tempered our conviction in both of these asset classes – especially on a risk-adjusted basis.  When considering the opportunities holistically, the last point to address is the home-country bias. This phenomenon is commonplace in many markets around the world, and while there are arguments for it (for example, capturing franking credits from equities), the reduction of this bias in Australia is a positive step towards managing risk.  Experience has taught us to see the investing world through the lens of absolute and relative valuation, to cautiously but positively await opportunities to buy great quality assets at times when their price is below the intrinsic value. Said another way, human predispositions can lead to poor collective behaviour – creating market cycles and an evolving reward for risk. We expect 2018 and beyond to be no exception, requiring a guarded stance when most assets look expensive. 


MAY 2018





LAST BEST STEP Mine Super has improved its portfolios by bringing asset allocation in-house and updating platforms. But it’s a change in mindset that’s maximising the payoff. By David Bell

OVER THE LAST three years, Mine Super has worked hard to establish the foundations for future investment excellence. We have internalised strategic asset allocation and updated the investment operations platform. We can already see the results of this endeavour – our portfolios are constructed better. Now comes the exciting part. We’re changing the way two of our existing internal teams work, to get the most out of the other upgrades. It’s the final piece of this process and it’s what will ensure that the investment team makes the most of the platform we’ve established. To tap into this upside, we must better integrate our existing manager research and asset allocation teams’ activities. Members of both teams need to partially adopt an investment strategist mindset and live our whole-of-portfolio focus.

MAY 2018

For those involved, this is exciting on many levels – collaboration, interest, contribution to outcomes, and career development. At Mine Super (formerly Mine Wealth + Wellbeing), manager researchers now have input into many of the strategic asset allocation assumptions and are constantly challenged to bring new investment ideas to the table. From here, they work with asset allocation to research the opportunity, bring it into our strategic asset allocation (SAA) framework, and see if it will improve our portfolios. Similarly, the role of the asset allocation team is broader than maintaining and improving existing processes. These team members are challenged to have the curiosity to learn constantly about new investment opportunities, and work with the researchers to bring them into our SAA framework.

Even more improvements will come in this final stage of a three-step transformation. But before we could get to this point, we had to lay the ground work. Here’s how it was done.

STEP 1 INTERNALISING STRATEGIC ASSET ALLOCATION We view the SAA as the foundation of excellent portfolios. The big question was whether investment excellence could be achieved if you outsourced your SAA to a consultant. While we regard the work of consultants highly, their advice can only ever approximate a solution to the problem of capturing the opportunities available to us within the constraints we face. Insourcing SAA is not easy. Developing the ability to at least match the quality of the services our asset consultant provided took a long time. We also had to provide our investment committee members with insight into what we developed so they could sign off on an internalised model with conviction. We had two consultants come in and review our models and processes and present to our IC. The IC approved the switch to our internal SAA framework in April 2016. There are many advantages gained from internalising SAA: • Establishing a culture of asset ownership by owning the return, risk, and diversification assumptions of each asset sitting in your portfolio • Accountability for the science of forecasting and portfolio construction. There are many competing methodologies and techniques • The ability to model each asset in the portfolio, rather than generic asset classes. This is particularly relevant to private assets, where there can be significant dispersion among individual assets within the same broad category; • Incorporation of assumptions around active returns and fees. Once the SAA process is internalised, there is the chance for further improvement and development. It becomes part of the investment team’s DNA.




















STEP 2 REBUILDING THE INVESTMENT OPERATING PL ATFORM Once Mine Super internalised its SAA, it found that it was operationally constrained from implementing its targeted portfolios. Owning the SAA capability allowed the fund to calculate the expected opportunity cost of this constraint, which then informed the business case for rebuilding the investment operating platform. The previous investment operating structure of Mine Super, like that in many super funds, is detailed in the diagram below. We identified weaknesses in this structure: each diversified option could allocate only to six asset-class sectors. We believe that, optimally, our various diversified options would target different opportunities within sectors. The greatest constraint was having a single alternatives pool, an area where a range of high- and low-risk opportunities exist.




The super and pension versions of each diversified option were both simply feeders off the respective diversified option pool. We weren’t accounting for the different tax environments our members faced. Our desired operating structure was: a large, unconstrained number of sectors (now about 40 active sectors). The portfolios for the super and pension versions of each diversified option are unique in their sector mix. The benefits of this structure are significant: the operational ability to implement the portfolios our SAA process identified. We have made greater use of the opportunities within alternatives as we seek to diversify equity beta among higher-risk portfolios, while replacing fixed interest exposures in lower-risk portfolios. There are unique super and pension portfolios for each of our diversified options, accompanied by unique






investment objectives. We account for the different tax environments that can affect both return and risk expectations (we model different tax environments in our SAA framework). The project took more than six months to implement. There was collaboration both within Mine Super (among the investments, finance, governance and risk teams, and the project office), and with external service providers (most notably custodian J.P. Morgan, transition manager Citi, and currency overlay manager State Street Global Advisors). Mine Super successfully rolled onto the new investment operating platform on July 1, 2017.


MAY 2018




R I VA L RY looks VO L AT I L E Are the two world powers on a collision course for war? Could global investors get smashed between the two? Unfortunately, the answers appear to be YES and YES.

PRESIDENT XI JINPING, during his first visit to the US in 2012, called for a “new type of great-power relations in the 21st century”. This statement was taken to imply that China seeks recognition as a superpower on a par with the US. For most of recorded history, China was the pre-eminent power. Back in 1784, when the first US ship landed in China, America was a small coastal nation with a population of 3.9 million and a mostly farming economy. China then had a population of 300 million, and accounted for an estimated 40 per cent of global GDP. History played a cunning trick, however. Not long after the founding of the US, China happened to go into prolonged decline. Without that circumstance, one is hard pressed to imagine the US becoming a superpower. By 1979, China’s claim on global output was a minuscule 1.5 per cent, despite having nearly 1 billion people. In contrast, the US, with less than a quarter of China’s population, boasted a 27 per cent GDP share.

STUNNING ASCENT Then, history surprised once more. Over the ensuing four decades, China’s GDP, in dollar terms, skyrocketed from about $270 million to $12 trillion. Today, the country accounts for more than 15 per cent of nominal world output. The US share sits

MAY 2018

just above 20 per cent. Several factors drove China’s stunning ascent. One key was Deng Xiaoping’s strategic reorientation away from the Soviet model, towards a de facto economic partnership with the US. The Chinese leader had observed the miraculous revival of his neighbour Japan from the ashes of the Second World War, followed by the rapid rise of South Korea and Taiwan, all of which had adopted a strategy of selling into the ravenous US market. In 1979, Deng became the first Chinese Communist leader to visit the US, which the next year opened its markets to China. The colossal appetites and purchasing power of the American middle class created the Chinese middle class. The interconnections have run deep. China and the US combined in the Second World War to defeat Japan’s attempted seizure of East Asia. And, notwithstanding China’s turn to communism and the two powers’ clash from opposite sides of the Korean War, the US initiated a rapprochement with Beijing, as a counterweight to Moscow, then fully supported China’s rise, fantasising that as that country grew rich, it would become more like America. Delusions aside, China’s revival has taken place entirely in a US-dominated world. The current situation – with the two countries simultaneously great powers – is a first.

MODERN CHINA CONFOUNDS What happens next? One of the fundamental problems with answering that question derives from China’s rebounding history. Everything we think we know about the importance of the rule of law and secure property rights, the necessity of freedom of information, the superiority of private companies, domestic political competition as sine qua non, and much else, we formulated without having to take China’s example into account. Now, many experts have been applying the laws of social science to a resurgent China and predicting the authoritarian system’s demise. However, decade after decade, the downfall fails to occur. Perhaps China will eventually be undone by the middle-income trap; that is, it will stop developing for want of high-quality institutions, and suffer social upheaval. Bad debt might cause a financial crisis and then a political bank run. Corruption could stop being a lubricant and become fatally corrosive. China’s state performs a great deal better than many experts think it should, and so does its economy. Never has a state this opaque become this wealthy and mighty. Germany and Japan before the First World War both were more politically pluralist and open than today’s Communist-ruled China. Analysts of the rise of imperial Germany


Rather than the expected deepening economic frictions, it is the unexpected or the half-forgotten – that old problem of Taiwan – that is poised to shatter everything

and imperial Japan are still debating whether it was their authoritarian regimes, or the nature of the international system of the time, that rendered them externally aggressive. This debate has implications for gaming the behaviour of contemporary China. What is certain is that imperial Germany and imperial Japan were profoundly influenced by Great Britain’s policies and global posture. Today, China’s trajectory is intricately intertwined with that of the US.

DOUBTS ABOUT THE US Beijing’s ability to continue on its upward path is not the only confounding variable. The institutional stability and overall reliability of the US have come to be doubted, too. Observers have gaped as the US administration deliberately undermines its own surpassing assets – democratic government, open markets, and mutually beneficial alliances. Behind this transfixing attempted suicide lie longer-term failings in understanding and responding to China. Investors have been put on notice by the White House’s erratic declarations of trade penalties, which address genuine issues but in self-defeating fashion, and China’s vows of retaliation. Each government is

seeking to demonstrate resolve. There is much more skirmishing to come, and no end in sight to the vicious rivalry over artificial intelligence, bioengineering and other frontiers of technology. But rather than the expected deepening economic frictions, it is the unexpected or the halfforgotten – that old problem of Taiwan – that is poised to shatter everything. China has made a point of reclaiming territories it views as historic possessions, most recently Hong Kong, and Xi personally reaffirmed Taiwan as Chinese territory and a “core interest”. The modernising People’s Liberation Army, for its part, is at last on the verge of acquiring the amphibious landing capacity necessary to seize Taiwan by force. Such an action might seem so selfdestructive, economically, as to be out of the question. But opinion polls of the island’s inhabitants have recorded a trend decisively away from Chinese identity toward a separate Taiwanese identity, the opposite of what mainland China had hoped for from stronger bilateral economic integration. Connect this fateful evolution to Xi’s aspirations to achieve a historic reign, and to America’s paper commitment to defend Taiwan’s sovereignty, and one can see just how combustible is this flashpoint. Can Beijing allow solidification of what, from its point of view, is a permanent separatist identity? Significant economic pressure has not chastened the Taiwanese. It seems only a matter of time before the Communist party leadership feels compelled to intervene. And if the US were to fail to reverse a mainland takeover of Taiwan, that would demolish American credibility throughout Asia, a perhaps too-tempting proposition for Beijing. Americans and Chinese, John Pomfret’s magisterial The Beautiful Country and the Middle Kingdom states, have repeatedly

been swept up into “rapturous enchantment begetting hope, followed by disenchantment, repulsion and disgust, only to return to fascination once again”. One hopes he’s right – and that relations soon re-enter the front end of that cycle. For now, the two powers are on the road to conflagration. Pomfret concludes that the US and China are locked “in an entangling embrace that neither can quit”. Xi’s evocation, in his 2012 speech and since, of revived superpower status and rewriting of the international rules, resonates profoundly with the mainland Chinese people. So does Beijing’s forward posture in the South China Sea, which the US Pacific fleet patrols. The US administration must figure out not only the Chinese regime’s objectives and bottom line, but also how Chinese decisionmakers view US objectives, and whether they consider US statements credible. Washington’s escalating confusion and ineptitude over how to handle China’s predictable, eventual refusal to accept subordinate status in a US-configured world does not inspire confidence. As the power shift continues and we puzzle over the varying degrees of resilience or brittleness of the two different systems, we remain bereft of answers to the question of what their stable coexistence might look like. Moreover, even if we knew the contours of that peaceful win-win equilibrium going forward, we would still have to figure out how both sides would get there. Business as usual is upending business as usual. Investors could play a part in a spiraling destabilisation, betting on making money from anticipated dislocation.


MAY 2018



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AU S T R A L I A’ S MAY 2018



At legalsuper, a long-term partnership with OnePath Life is now leading to improvements in data systems and members’ overall wellbeing. or disablement claims – so one fundamental focus for us has, and will continue to be, improving the experience of claimants.


Why has legalsuper signed up to the Insurance in Superannuation Voluntary Code of Conduct?

As the super fund for Australia’s legal community, legalsuper always conducts itself with the highest levels of transparency and to deliver best outcomes for our members. We proactively seek ways to improve processes, performance and disclosure practices. What changes have been made or will need to be made to meet the code?

Our board resolved to adopt the code at its March meeting, recognising that full implementation will require time and may require financial investment; however, this will always be undertaken in the best interests of our members. The code was created partly in response to identified instances of previous poor claims handling by some organisations – which was disappointing given the sensitive issues that arise in respect of death and/

Is legalsuper making any other improvements to its insurance offering? Why?

legalsuper was able to hold members’ insurance premiums constant over the last six years preceding our last renewal. In late 2017, at the time of our last renewal, the increase we

As an example, a recent focus group of more than 70 law students highlighted a concern that insurance premiums were reducing their super balances. This feedback resulted in legalsuper reducing default insurance cover and the associated premium for younger members. Default cover up to age 25 was halved, reducing from $440,000 a year to $220,000, and premiums were halved from $7.80 a week to $3.90.

Our board resolved to adopt the code at its March meeting, recognising that full implementation will require time and may require financial investment

put in place still left us below the industry median. We comprehensively review our insurance offer every three years and continually monitor our performance in claims handling. Our specialisation in the legal community means our membership is more homogenous than at super funds that serve diverse occupational groups. Our insurances are, therefore, better designed to suit the needs of people who work in the legal community.

Our overall insurance cost, flexibility and suitability – in addition to the collaborative approach we take to working with our insurance provider – was recently recognised with a key industry award from SelectingSuper. Throughout our 11-year association with OnePath Life, our insurance partner, we have combined our deep and growing understanding of our members’ needs, evolving profile, characteristics and requirements, with OnePath’s capacity to work with us to

design and deliver a range of insurance options that suit our full cross-section of members. Two recent initiatives legalsuper has been working on with OnePath are in technological enhancements to improve information management and member experiences, and mental health. The latter is a subject in which legalsuper has a keen interest, through our association with SANE Australia. With an ongoing aim of providing more visibility, transparency and convenience, OnePath is delivering improvements to the storage, presentation and utility of underwriting information and enhancing claims reporting data and systems. OnePath is also working to deliver access to an integrated, real-time information portal to further enhance claims data extraction, monitoring and management. In mental health, OnePath has established a new senior role, head of mental health and wellness for life insurance, which is aimed at improving customers’ mental health and wellbeing, in recognition of this very important issue. legalsuper actively works to maintain a constructive and rewarding working partnership with OnePath, with whom we share a common goal of making available the best value, best quality and most appropriate insurance cover for people who work in Australia’s legal community. LIFESKILLS Lifeskills is a regular section in Investment Magazine. Each month, we publish an independent column from an industry leader with insights into best practice in the group insurance sector. This page is produced with thanks to advertising support from AIA Australia.

MAY 2018







With ACSI SOON TO LAUNCH a code of practice focused on transparency, the super industry and professional investors are already making moves towards better stewardship of human rights and supply-chain risks. By Meredith Booth

AUSTRALIAN SUPER FUNDS will have a chance to show how they will encourage ethical practices within their investments as the industry launches a code of practice this month. The Australian Asset Owner Stewardship Code will be launched at the 2018 Australian Council of Superannuation Investors (ACSI) Conference in Sydney on May 17. The peak industry body will urge all asset owners to sign up. ACSI chief executive Louise Davidson says the code has been created to cater for the growing desire among beneficiaries and stakeholders for information about how asset owners manage the funds entrusted to them. “We see this as an opportunity to shine a light on the important work asset owners do to protect and enhance long-term value for their beneficiaries,” Davidson says. The code will promote the transparency

MAY 2018

and accountability of asset owners’ stewardship practices and make it easier to understand how asset owners approach their stewardship responsibilities. “It will provide insight into a wide range of stewardship activities, including exercising voting rights, company engagement, monitoring asset managers and financial system advocacy,” Davidson says. “Reporting and disclosure requirements are embedded into the code.” Colonial First State Global Asset Management head of responsible investment, Asia-Pacific, Pablo Berrutti, says professional investors are moving to improve ethical standards in response to recent scandals in Australia involving franchise models such as Domino’s Pizza and Caltex, and due to the use of labour hire in agricultural supply chains by Woolworths and Coles. Labour and human rights risks for

investor portfolios were once thought to be the sole realm of supply chains in emerging markets, but have been brought into sharper focus at home, Berrutti says. Five leading industry bodies support an Australian Modern Slavery Act, to be debated in Parliament this year, aimed at improving information across the market and, consequently, engagement with companies from investors and other stakeholders. “We need a race to the top on this issue, which [affects more than] 40 million people and 150 million children around the world,” Berrutti says. “The best way to start that race is through greater transparency.” Asset owners need to commit to engaging with these issues within their portfolios, rather than walking away, he argues. “It is easier for an investor to respond to a scandal on the front page of a newspaper than it is to develop a long-term conversation on human rights,” Berrutti says. “Ultimately, investors need to set expectations for companies to follow the [special UN special representative John] Ruggie Principles on Business and Human Rights and provide adequate disclosure.” He says there is a high level of engagement and genuine interest in these issues and is encouraged that


40 investors attended the first meeting of the Responsible Investment Association Australasia human rights working group, which was recently set up.

UNIVERSAL OWNERS First State Super responsible investment manager Liza McDonald says the $89 billion fund has placed franchise models in Australia under scrutiny recently, which will inform its engagement with companies. McDonald says alleged wage fraud and migrant rights abuses related to a variety of franchises in Australia recently have become an emerging risk for big investors. Large super funds such as First State must embrace the principle of universal ownership, she says, to ensure companies have good workforce relations and manage safety, supply chains, diversity and adherence to international guidelines on human rights. “Universal owners are defined as pension funds or other institutional investors that are so large they become an integral part of the market microstructure,” McDonald says. Open dialogue with companies allows First State investment managers to continue to monitor its concerns around franchisee risk and ensure corrective action is understood and being taken. She says the biggest labour and human rights risks in the fund’s portfolios are from companies with large workforces or supply chains – and they appear across all asset classes and geographies. The fund also supports a Modern Slavery Act, based on the UK’s Modern Slavery Act, established in 2015, after the 2013 Rana Plaza collapse in Bangladesh, in which more than 1000 garment workers died as a result of poor construction and safety standards. “We welcome a Modern Slavery Act to improve transparency about how companies operating in Australia are managing modern slavery risks in their operations and supply chains,” McDonald says.

IN DEVELOPED MARKETS New Zealand Super Fund responsible investment chief Anne-Maree O’Connor says she has been passionate about human rights for decades, with issues around bonded labour and child labour always

at the heart of responsible investment. O’Connor was recently voted the world’s eighth most influential asset owner responsible investment specialist in the 2017 survey on Independent Research in Responsible Investment. She says the focus is shifting to developed countries where abuses of migrant workers’ rights are emerging – from horticulture to hospitality and healthcare – in Australasia. Human rights abuses are a “pernicious thing” that must be “stamped out at the root” through vigilance from investors and company boards, particularly those of large multinationals that source from many countries, she says. “There’s real brand and reputational risk on the human rights side and that [affects] both business-to-business and particularly business-to-consumer reputation and relationships and therefore, ultimately, revenue,” she says. This translates to fiduciary risk for institutional investors and super fund managers must understand those risk factors in their analyses, O’Connor says.

TEMPL ATE TO STOP ABUSES The NZ Super Fund, which has almost $40 billion in assets under management, has made investment exclusions based on human rights, particularly within the resource and security forces sectors in high-risk areas. O’Connor says the UK’s Modern Slavery Act, introduced in 2015, has provided Australian companies with a template for stamping out and dealing with abuses within the supply chain. “The UK slavery act has focused on reporting because each situation generally requires its own special solutions to change it. It’s hard in law to prescribe the actions to take,” O’Connor says. “Companies in Australia can look at counterparts in their particular sector and go, ‘That was a useful statement.’ I think they’re almost becoming education tools.” She says while it is great to have “soft and hard law” guidance on human rights, such as UN principles and industry standards, Australasian companies must also map where there are labour force vulnerabilities.

ETHICS ‘BREAKTHROUGH’ As a positive sign of renewed focus on ethical investment, ethicist Simon

Longstaff highlighted AMP Capital’s “breakthrough” decision this year to divest from exposure to tobacco and munitions in its investments. AMP announced it would sell $440 million in exposure to tobacco and $130 million in exposure to cluster munitions and landmines, following discussions with Longstaff’s Sydney-based Ethics Centre. “What was such a breakthrough in AMP’s thinking was that they realised they were entitled to set their own moral boundaries about how they go about earning profits,” Longstaff says. “They decided there were some boundary lines that they clearly did not want to cross. “Their decision is not different to a doctor who, through religious beliefs, might refuse to perform certain procedures, or a taxi driver who says there are some people I won’t give carriage to because they’re drunk. “In one sense, it’s an entirely unremarkable decision to make. In another, it stands out because it is so clear and unusual for a corporation to set its own boundaries in that way. All investors need to ask themselves the same question: Just what is it we’re prepared to do to generate our profits?” He says AMP’s framework could be applied to any investment decision. The guidelines include: not investing in entities or activities that undermine fundamental human dignity and violate international human rights law; considering the extent to which investments are in entities or products that cause harm. AMP will also bear in mind whether engagement with a company might be a better route to achieving a positive ethical outcome. Longstaff says moves by companies and the funds that invest in them are heading in the right direction. “Investment advice is starting to be redefined as an ecology of meaning, not just doing,” Longstaff says. “What you can differentiate on is what you stand for and how you apply that across relationships.”


MAY 2018






Keeping the planned increase in the superannuation guarantee and making a government payment into the savings of low earners are among the best ways to get the system to work for women.


THERE IS GROWING concern regarding the lack of economic security an increasing number of older Australian women experience, and there should be. Growing numbers of women, particularly those who are single, are left to survive their years in retirement living below the poverty line. A Senate report on this issue in 2016 revealed that older single women are the fastest-growing cohort of homeless. Women retire with just over half the super of men, and the gender retirement gap is not likely to improve in coming years on current settings. It is imperative that we change these settings to improve adequacy and equity for women. Increasing the Superannuation Guarantee (SG) to 12 per cent would have the largest impact on improving the adequacy of retirement income for women. Whilst 12 per cent SG is legislated (though on a deferred timetable), commentators and the Minister for Financial Services Kelly O’Dwyer have recently questioned this policy.

If the SG remains at 9.5 per cent, a 25-year-old woman earning $25,000 a year stands to lose about $30,000 of superannuation savings

MAY 2018

Let it be clear that a move away from 12 per cent SG would bequeath poverty in retirement to future generations of women. Many women do not have the capacity to make additional superannuation contributions or accumulate savings outside superannuation. Critics of the move to 12 per cent SG – such as the Grattan Institute – profess concern for low-income earners but offer no alternate proposals guaranteed to increase superannuation savings and improve economic security in retirement for these earners and other workers who will be disadvantaged if the SG remains at 9.5 per cent. They seem more concerned with making budget savings. If the SG remains at 9.5 per cent, a 25-year-old woman earning $25,000 a year stands to lose about $30,000 of superannuation savings, worth about $1500 a year in retirement income (based on Rice Warner modelling). Government helps individuals save for retirement through tax concessions, which are estimated to cost more than $30 billion a year. Both the Henry Review and the Financial Services Institute pointed to the need for structural change to overcome inequitable and poorly targeted tax concessions. Women in Super (WIS) welcomed the government replacing the Low Income Super Contribution (LISC) with the Low Income Super Tax

Offset (LISTO), as this measure, which applies to those earning less than $37,000, affects half of all working women. LISTO reverses a tax penalty. It is not an incentive payment that adds to the super savings of low-income earners, like the tax concessions paid to higher income earners do. Government assistance through tax concessions to the top 20 per cent of income earners can be $10,000-$15,000 a year. Lower income earners do not receive a contribution from government. Half of all working women receive none of the $30 billion the government spends helping Australians save for their retirement. WIS proposes that government make a $1000 super contribution to lowincome earners over age 25 with an account balance less than $100,000. The payment is targeted towards the many women who need assistance to save for their retirement, including those whose income drops due to caring responsibilities. This payment would generate an 11.7 per cent increase in the retirement balance of a 25-year-old earning $35,000 who has two children and works part time. This proposal forms part of the WIS Make Super Fair policy, supported by the Australian Institute of Superannuation Trustees (AIST), which also includes: • No further delay to scheduled SG increases • Pay SG on the paid parental leave scheme • Remove the $450 monthly income threshold on SG contributions • Require government to undertake and publish a gender impact statement for any changes to age pension or retirement income policy • ongoing tracking of the women’s retirement gap.



AIST’s flagship educational offering - the Trustee Director Course - recognises the unique role that superannuation trustee directors have in providing a better retirement outcome for working Australians. The flexible delivery of the Trustee Director Course means participants can complete the full course in five days or break it down into individual days across any time period. Participants can also choose to attend individual days of the Trustee Director Course at any time to address specific professional development needs. Facilitated by AIST and industry experts, each program is delivered via a combination of interactive case studies and practical ‘real life’ learning experiences.

BUILD YOUR EXPERTISE The role and responsibilities of a trustee director are different to a corporate director. This course will develop competence in the regulatory environment of superannuation, trustee director responsibilities, understanding how super fund boards work and analysing super fund board reports.

ENHANCE YOUR EXCELLENCE Designed for experienced trustee directors, this course enables participants to become more effective in the boardroom by improving decision-making skills, developing the capacity to lead board discussions and making more valuable contributions to the fund’s strategic direction.

s place d e t Limi ble for a avail ates d ! 2018 DAY IST REG

This course recognises the unique skills and heavy responsibilities required of today’s trustee directors - it should be on every trustee’s radar. JOHN BRUMBY CHAIR, MTAA SUPER

Contact the Education team on or 03 8677 3800


MAY 2018





Profit-for-member funds can improve member retention by offering help navigating age pension red tape. financial advice. Most retirees, however, find this expensive, intimidating and unnecessarily complicated. Furthermore, tailored advice can be expensive for funds to deliver and difficult to scale.



INDUSTRY SUPER AUSTRALIA has reported that only 5 per cent of those who are active members of Industry Super accumulation funds at 55 are members of income streams at 66. A surprising statistic, given the brand strength of profit-for-member funds. Industry blog Trialogue recently noted that while member retention at retirement in profit-for-member funds has improved, it is still far lower than for retail funds. With about 700 Australians reaching retirement age daily, the boomers are a large and important segment of the market. Many Australians in retirement or transitioning into retirement feel anxious when making financial decisions and it is difficult for them to find help. The right course of action depends on their circumstances and desired retirement lifestyle. Many of those approaching retirement with substantial savings will access tailored

Consequently, members left to their own devices are prone to making poor retirement decisions. Some will overspend early in retirement, endangering their standard of living in the longer term. Many others fear running out of money or becoming a burden on their families, so they become very nervous when their superannuation balance falls. While there is a segment of boomers who will self-fund their retirement, the majority are everyday Australians who only dream of having $1.6 million transfer balance cap problems. It is this group that is in danger of being left behind. We spoke to

them about what would help them make better decisions. Some of what they said we expected; they want unbiased, trustworthy advice that gives them options, and they are worried about security and the privacy of their information. Other responses were unexpected; we thought retirees would appreciate help in managing their expenses but they were much more interested in finding ways to generate income and tracking the performance of their investments. Our research revealed that their biggest pain point was accessing their age pension. Centrelink received 174,000 claims for the age pension last year, a number that is growing quickly. Having a reliable, regular source of income is reassuring; it is important to know that regular bills are covered. The age pension is the foundation of retirement

A problem so central to the wellbeing of pension phase members provides an opportunity for funds

MAY 2018

income for many, and a critical part of maintaining a certain standard of living.

‘A NIGHTMARE’ Yet the process of applying for this reassuring income was consistently described as “a nightmare” and “an alienating experience” not befitting people who’d worked for many years and paid their taxes. Retirees were overwhelmed by the complicated questions and the number of forms they were required to complete. There are long waiting times at Centrelink offices and it was necessary for many to return several times. Many tried to call Centrelink for help but couldn’t get through; 55 million calls to Centrelink received a busy signal in 2016-17. We heard stories from retirees who were so frustrated they simply gave up, even though they knew they were eligible for a payment and related benefits such as the pensioner concession card. A problem so central to the wellbeing of pension phase members provides an opportunity for funds. Digital services that enable members to check their pension eligibility, prepare their pension application and guide them through Centrelink’s maze are now available. The extensive data gathered in the process has the potential to facilitate costeffective, scaled retirement income advice for the member and possibly the member’s partner. These services can help funds engage and retain members in pension phase. The purpose of super is to provide income in retirement to substitute for or supplement the age pension. A logical step for funds, then, is to help their members in pension phase access their Centrelink age pension entitlements.




Charting your course through shifting societal expectations. 1 & 2 August 2018 Hilton Hotel, Sydney


Peter Greste Professor, UNESCO Chair of Journalism and Communications at the University of Queensland

Helen Rowell Deputy Chair, APRA

Karen Chester Deputy Chair, Productivity Commission

Tim Silverwood Co-founder and CEO of Take 3

MAY 2018





The Australian Asset Owner Stewardship Code will offer guidance and accountability on RESPONSIBLE INVESTING.


ASSET OWNERS ARE significant providers of capital to listed companies. There is a growing desire among individuals, non-government organisations and civil society for information about how asset owners manage the funds entrusted to them. I see this as an opportunity to shine a light on the important work asset owners do. Australian asset owners have a long history of engaging with companies and voting their shareholdings to protect and enhance long-term value for their beneficiaries. Domestic super funds and institutional investors have a strong focus on the integration of environmental, social and governance (ESG) risks and opportunities into their investment decisions, based on a firm belief that these are financially material for long-term investors. The Australian Council of Superannuation Investors is a vehicle for active ownership. Through collective action, our members have contributed to improvements in the

performance of Australian listed companies on issues including board transparency and accountability, sustainability and management of climate and human rights risks, ESG oversight and board gender diversity. Yet, outside of investment circles, little is known about the range and depth of these stewardship activities.

code in Australia. However, this is the first code to focus exclusively on the activities of Australian asset owners. The code will provide insights into a wide range of stewardship activities, including exercising voting rights, company engagement, monitoring asset managers and financial system advocacy. Reporting and

How asset owners protect and enhance long-term value for their beneficiaries is an essential part of their purpose We believe ACSI members and other asset owners in Australia make a significant contribution to good stewardship. However, we recognise that more can be done to reassure people about the robustness and effectiveness of these activities. That’s why ACSI and our members, in consultation with a range of external stakeholders, have developed the Australian Asset Owner Stewardship Code. Stewardship codes exist in more than 25 markets around the world, including the UK, US, Hong Kong, Japan, and South Africa. European and global stewardship principles have also been established, along with a fund manager stewardship

MAY 2018

disclosure requirements are embedded within the code to promote transparency and accountability. The code has six key principles, which signatories must implement on an ‘if not, why not’ basis: • Publicly disclose how they approach their stewardship responsibilities. • Publicly disclose their policy for voting at company meetings and voting activity. • Engage with companies either directly, indirectly (for example, via collective

action or third-party providers) or both. • Monitor asset managers’ stewardship activities. • Encourage better alignment of the operation of the financial system and regulatory policy with the financial interests of long-term investors. • Report to beneficiaries about their stewardship activities. Signatories will be required to publish a stewardship statement on their website that describes how they apply these principles or, if one or more of the principles has not been adopted, explain the reasons for this. ACSI will maintain a list of signatories on our website, including a link to their stewardship statements and contact details for queries. The code is voluntary and all asset owners are encouraged to sign up. Although it has been developed for asset owners (such as superannuation funds, endowments and sovereign wealth funds), we encourage other institutional investors to follow it. We are happy to hold discussions with asset owners who are interested in signing up; requests can be directed to I believe having a strong sense of purpose contributes to business sustainability. How asset owners protect and enhance long-term value for their beneficiaries is an essential part of their purpose. The code will demonstrate the importance signatories place on good stewardship, but more so that their intentions are backed by credible action. This is a strong basis from which to build trust and set the tone for stewardship in Australia.



A VOLUNTEERING DAY YOU CAN PUT YOUR HEART INTO The Wayside Chapel invites you and your colleagues to spend a day in Kings Cross learning about life on the streets and lending a helping hand to the most vulnerable people in our community. Come to hear about lived experiences of homelessness, learn about local social issues, and cook and serve a lovingly prepared meal. You’ll leave with a different perspective of the people you pass in the street, and a whole lot of love.




QIC GLOBAL REAL ESTATE. REINVENTING RETAIL. Where most see shopping centres, we see opportunities to transform communities into thriving lifestyle, entertainment and retail destinations. For over 27 years, we have focused on identifying the right retail assets, ready for growth, and maximising their potential for our clients. With $20.5 billion real estate assets under management*, our established platform in the U.S. and proven track record in Australia have equipped us with the specialist expertise to reinvent the strongest local retail opportunities. We do this to deliver investors the outcomes they seek. QIC. Global Diversified Alternatives.

Global Real Estate Global Infrastructure Global Private Capital Global Liquid Strategies Global Multi-Asset To learn more about QIC Global Real Estate, please visit or contact: Leonie Wilkinson Director, Investment Specialist, Global Real Estate T +61 434 079 357 E

Grant Brady Director, Investment Specialist, Global Real Estate T +61 435 966 707 E

QIC Limited ACN 130 539 123 (“QIC�) is a wholesale funds manager and its products and services are not directly available to, and this communication is not intended for, retail investors. Past performance is not an indication of future performance. For more information about QIC, our approach and regulatory framework, please refer to our website or contact us directly. *As at 31 March 2018 and in Australian dollars. MAY 2018

Investment Magazine May18_Issue 149  
Investment Magazine May18_Issue 149