The major consulting contract, formerly with Russell, has been given to Mercer, although Russell still provides ad hoc research for the fund. The Ray King-founded Sovereign Investment Research, and Access Capital Advisers, help source the infrastructure and alternative investments overseen by portfolio managers Megan Chan and Bruce Tomlinson. “During our strategic asset allocation review we used information from Mercer, Russell, Access [Capital Advisors], Makena Capital and Bridgewater,” Hartley says.
The fund’s alternative investments also extend to the terrains frequented by US academic endowment funds, an area notoriously difficult to access since the managers in this market rarely open to money from new investors. Sunsuper’s passport was a $605 million mandate with Makena Capital Management. Makena’s portfolio is run exclusively by former endowment and foundation principals, such as ex-Stanford chief executive Mike McCafferey, and implements strategies similar to those used by the endowments across listed equities, private equity, hedge funds and listed and direct property. “They want equity-like returns with half the risk,” Hartley says. Sunsuper is the only Australian super fund to have secured an investment with Makena. “It has given us access to opportunities that we did not have, and more credibility,” Hartley says.
In late 2007 the fund purchased the assets of a listed infrastructure fund run by Colonial First State (CFS). The managers of CFS Private Capital were willing to shed assets, but could only find buyers for individual holdings. Sunsuper was interested, but reticent to buy, say, Brisbane or Perth airports as single investments, since the existing shareholders in those assets would be offered them at the same price that Sunsuper might propose. Instead, the fund chose to “clean the whole thing up” for $116 million, a 1 per cent premium to net-asset value.
These alternative investments were identified primarily as separate opportunities and not part of a planned strategy. “We’re interested in new ways of making lots of money,” Hartley says. “Personally, I’m one of those who want to own as much of the world as I can when I retire.”