REST Superannuation has added a new “growth alternatives” sub-asset class to its portfolio and awarded two new mandates worth a total of $300 million.
The $13 billion Retail Employees Superannuation Trust allocated $150 million in the December 2008 quarter to Credit Suisse’s Syndicated Loan Fund, which provides exposure to high yielding investments, primarily through the US syndicated loan market.
During the same quarter, REST awarded $150 million to Stone Tower’s Offshore Credit Fund. The mandate was expanded by $50 million in February.
Both mandates are part of the new growth alternatives sub-asset class, which aims to provide equity-like returns for members.
“These two mandates are the first two awarded in a growth alternatives sub-asset class that we’ve added to our growth assets,” said Damian Hill, chief executive officer of the fund.
“We’ve taken the money from our cash holding – we’ve built up a fair degree of cash – and just feel that it’s an appropriate time to start adding some risk back into the portfolio, but in a slow measured way.”
Non-investment grade debt is an area that many super funds may be minded to avoid in the current environment, however Hill believes the time horizon of such investments is suited to the fund.
“We’ve had a look at what opportunities are being thrown out as a result of the global financial crisis and see this particular area as an area that is providing opportunities, provided an investor has at least a three to five year investment time frame,” he said.
“We think some of the pricing of these is a little bit indiscriminate and not based on the fundamentals so provided you have managers who can do strong fundamental research that there is an opportunity to add value.”
Hill said the move into credit was part of the foray into growth alternatives.
“There’s been significant falls in value [in the credit markets], some are continuing to fall, and based on the fundamentals and looking at base cases and stress cases on a number of areas, we felt the risk/reward trade-off was interesting enough for us to commit capital to it,” he said.
REST is “constantly looking at opportunities that are being thrown up” and would expect to keep investing over the course of the year in a wide range of asset classes, “depending on where we find value”, Hill added.