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Fund managers

The suite of global fund managers Local Government Super has selected to manage its investments are highly skilled and experienced, so you can be assured your money is in good hands.

Australian shares

LGS has more than $2 billion invested in Australian shares. These assets are managed by five investment managers. Approximately half of the funds are with a customised State Street Global Advisors (SSgA) enhanced index fund, along with a number of active managers who aim to outperform the broader market.

ManagerInvestment style
State Street Global Advisors (SSgA) SSgA manages its enhanced index fund with a tightly controlled risk tolerance with the scope to outperform the index.
BT Investment Management A large fund manager that uses their internal research to invest in the most attractive shares.
Intrinsic Investment Management A manager with a strict focus on high quality companies. They take a long term approach to investment with a focus on the largest 200 Australian companies.
Ubique A Sydney based manager that has a focus on good value high quality companies. They run a concentrated portfolio of 30 stocks.
Colonial First State Colonial’s Small Cap Fund invests in smaller companies, which over long periods have given the best returns. LGS has held this investment since the start of 2007. Since that time the fund has outperformed the broader share market over the last five years.
ECP ECP Asset Management invests on high conviction growth companies. They run a concentrated portfolio focused on about 20 small cap stocks.

International shares

Investments in this sector total over $2.2 billion. The structure is similar to the Australian Shares sector, with a large index fund allocation, plus a number of active managers.

ManagerInvestment style
Hermes Investment Management Hermes has managed an enhanced indexed strategy which features strong integration of environmental, social and governance factors in their investment process for LGS since November 2012.
LSV Asset Management LSV has managed funds for LGS for over eight years and has done better than the market as measured by the relevant index. LSV has a focus on cheap shares, called a value bias.
MFS Investment Management MFS believes in investing in high quality companies. They are based in Boston USA with offices around the world.
Longview Partners Longview are a London-based manager with a strong track record. They runs a concentrated portfolio of about 35 stocks.
AQR Global Enhanced Equity Fund AQR seeks to build a lower-risk portfolio by overweighting stocks that exhibit higher quality and are less volatile relative to an index and underweighting lower quality, more-volatile stocks.
Vanguard Investments Vanguard's index fund holds shares in nearly 1,500 stocks, giving LGS an interest in nearly every large listed company in the world.
Wellington Wellington mainly invests in Emerging Markets companies. Their investment style blends top-down country and sector analysis with bottom-up stock selection in a relatively concentrated, actively managed approach.
Delaware Delaware is another Emerging Markets Fund who employ a disciplined, fundamental, bottom-up approach to take advantage of the short-term emerging market divergences.
Impax Asset Management Impax is a leader and specialist in Environmental Markets. They invest in the best global companies from within the renewable energy, water treatment and waste industries.

The currency exposure associated with the international shares is benchmarked at 40% hedged but it can vary around this. National Australia Bank has been appointed to help manage the currency hedging for international shares. Note that all other international assets are fully hedged. This includes fixed income, private equity, global property and absolute return funds.

Fixed Income and Cash

LGS has more than $2.5 billion of fixed income assets, with the following allocations:

Asset% allocationManagers
Australian Cash 37% QIC, Mutual Ltd
Australian Government Bonds 31% AMP Capital
International Bonds 21% PIMCO, Omega Global Investors, Brandywine Global Investment Management
Australian Government Inflation Linked Bonds 9% Ardea Investment Management

The Australian Government Bonds are managed by AMP Capital, while the Inflation Linked Bonds are managed by the specialist manager, Ardea Investment Management.

The International Bonds include an active Corporate Bonds component managed by PIMCO, one of the largest bond managers in the world. LGS has been invested in the PIMCO fund for 12 years. There is also an innovative active Sustainable International Government Bond fund mandate run by Omega Global Investors, and an International Fixed Interest mandate managed by Brandywine Global Investment Management.

The Cash assets are invested by QIC and Mutual Ltd. QIC invests in high quality (mostly AA rated credits), short-term bank and company debt securities. Mutual invests in debt instruments offered mainly by the Australian banks. The objective of this fund is to beat the returns of the Bank Bill index.

Property

The LGS investment portfolio has around $620 million in property assets, including nearly $550 million in a direct property portfolio of eight buildings and over $180 million with Resolution Capital to invest in global listed property, i.e. property companies that trade on stock markets. We also have around $40 million invested in GPT Wholesale Shopping Centre Fund and $30 million in Investa Property Group.

The eight direct property assets are all located in New South Wales and are diversified across three sectors, as shown in the table below:

Direct Property selector allocation:

  • Office: 53%
  • Retail: 39%
  • Industrial: 8%

LGS runs an award winning Green Building Policy that seeks to limit the impact of the properties on the environment. Some members may have visited one of our shopping centresMarketPlace Leichhardt or Village Centre Batemans Bay.

Private Equity

LGS has invested with the following Private Equity managers:

  • Actis Capital
  • Avenue
  • Baring Asia
  • Bain Capital
  • Cerberus
  • CHAMP
  • EQT
  • Golden Gate Capital
  • Hawkesbridge Capital
  • Oak Tree Capital
  • Paul Capital Partners
  • Quadrant
  • Terra Australis
  • The Growth Fund

This term refers to equity investments that are not listed on the share markets. With an equity investment, your income comes from dividends (or distributions) rather than fixed interest payments.

The returns from successful private equity investments can be high if the timing is right and the best quality managers are used. However, these private investments can be difficult to sell, and often they have to be held until the assets are liquidated. LGS has a growing portfolio of private equity investments, with a total value of over $500 million.

These funds make many direct investments in private companies that range from health care providers to an online jewellery retailer.

LGS also has investments with Stafford Private Equity and Wilshire Private Markets, two funds that in turn, invest with other underlying managers. Stafford fund invests in a range of clean technology companies and the Wilshire fund invests in mature companies located in Asia and Australia.

Absolute Return

The final part of the investment portfolio is called the Absolute Return sector, and this has over $1.1 billion in assets. The objective for these investments is reliable, steady returns with a low chance of negative performance. LGS has been able to take advantage of increased credit spreads caused by the global financial crisis, and make investments in mandates using high quality credit investments. This section consists of credit security and hedge funds.

The below is the composition of LGS Absolute Return sector:

  • Credit Securities
    • Macquarie Investment Management - It has a strategy to invest in Australian mortgage securities and Australian bank debt. LGS is helping to fund the banks, who use that money to make new loans to the public and companies. Mortgage securities provide loans for people to buy their own house.
    • Kapstream – They invest in debt securities of high quality companies both in Australia and overseas. They also do hedging to avoid interest rate and currency risks.
  • Hedge Funds
    • Attunga Enviro Opportunities Fund
    • Winton Global Alpha Fund
    • AQR Delta Fund
    • GAM Absolute Return Bond Fund
    • SouthPeak Real Diversification Fund

 


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