How we invest

We carry out due diligence on all prospective investments. We then actively monitor the performance of our selected investments to ensure they meet our high standards.

Our International Equities investments are predominantly made through third party underlying funds that invest in equities. We look for third party underlying funds that have proven themselves with outstanding track records over a long period of time. Some of the third party underlying funds may use other securities and have the ability to short-sell assets and use leverage. When researching and monitoring these underlying funds, amongst other things, we look at the following criteria:

  • Investment philosophy and strategy – Do they have a clearly articulated philosophy and strategy and do we agree with that strategy based on our view of the investment environment?
  • Ownership and alignment of interest – Does the ownership structure and business model of the fund and the Underlying Fund give the right incentives to maximise risk-adjusted returns for our investment?
  • Investment team experience, track record and stability of personnel – Does the investment team have the right skills and depth? Have they proven they can outperform over a long period of time? Have they worked together over a number of cycles and have low turnover of staff?
  • Liquidity – We prefer funds with large funds under management and that have good liquidity.
  • Leverage – We prefer funds that have no or what we consider are acceptable levels of leverage.
  • Fees – Do the fees offer good value in our opinion? Does the addition of a particular fund keep our overall fee structure at a reasonable level?
  • Portfolio Management – Does the fund fit into our wider portfolio and does it provide adequate diversification?
  • Independent auditor – The fund’s auditor must be independent and reputable.
  • Custodian – The custodian of the fund should be independent or an independent function within a larger organisation.
  • Regulator and jurisdiction – All investment funds must be regulated in a well recognised jurisdiction.

We also invest directly into international equities. These stocks have large capitalisations (greater than USD $25 billion). 

Our Property and Infrastructure investments are predominantly Australasian property and infrastructure listed securities. When researching and monitoring Property and Infrastructure assets, amongst other things, we look at the following criteria:

  • Property portfolio – Quality and mix of commercial, industrial, retail and/or residential assets. Quality of the tenants and the lease terms.
  • Infrastructure portfolio – Quality of the infrastructure assets, their life cycle and business model characteristics.
  • Pricing – Do we think the current price reflects fair value?
  • Distributions – What is their distributions history and what are future expectations?
  • Strategy – What are the company’s intentions in regards to future growth and capital expenditure?
  • Market capitalisation and liquidity – We prefer investments with substantial market capitalisation and good liquidity.
  • Debt – Are their debt levels acceptable?
  • Management – How are they regarded and what is their track record?
  • Portfolio Management – Does the asset fit into our wider portfolio and does it provide adequate sector diversification.

Our Fixed Interest investments can include loans to the Government, local authorities, banks and corporations. The borrower pays interest on the loan. The value of fixed interest investments change with movements in interest rates. Ordinarily, these loans return capital plus a fixed return over time. When researching and monitoring fixed interest assets, amongst other things, we look at the following criteria:

  • Credit worthiness – Where rated, we have an 'investment grade' minimum for our fixed interest securities. We look at the rating of the issue and issuer. Where the fixed interest securities are unrated we can invest in the issue if, in our opinion, the issue is of equivalent quality.
  • Structure – What are the specific terms of the issue?
  • Pricing – Do we think the current price reflects fair value?
  • Liquidity – Does the issue have good liquidity?
  • Portfolio management – How does the addition of a security effect our sector and issuer diversification? How does it affect the maturity profile of the portfolio?

We actively manage currency exposures by deciding whether or not to fully or partially offset the impact of currency movements via entering into foreign exchange transactions. This is known as “hedging”.