“We would be more interested in them saying ‘well there is an inevitability about carbon risk that we should be managing’.” Robertson says that a key point in the development of the fund was when LGS appointed its first chief investment officer, Craig Turnbull, three years ago. The fund had previously shared a CIO with EISS. Since his arrival, Turnbull has looked to bolster LGS’s approach to risk management generally, with ESG considerations playing just one part of that. The fund is four months into a trial of an indexing methodology it has developed in-house to de-risk when key market factors are triggered. The indexing methodology is a systematic strategy that covers a range of indicators in the 12 largest equity markets and looks at such things as economic growth outlooks, inflation, currencies and bond yields. Described by Turnbull as similar to an “early warning system” the strategy is designed to retreat to cash to avoid potential downturns.
The fund has trialled it across 5 per cent of the overall international equities portfolio and Robertson said the fund was generally wellpositioned defensively before the market hit turbulence in August. But the strategy has been designed to be scalable. At the end the financial year to June, the fund achieved about a 9 per cent return for higher growth options and 7 per cent for more conservative strategies. It offers six different strategies to members, from high-growth to cash. Despite Australia’s superannuation funds looking at a period of consolidation as the government’s sweeping reforms to the industry start to take effect, Robertson said he does not expect mergers with other local government funds. “My expectation in five to 10 years is that we will still be Local Government Super,” he says. “There is some merger activity with other local government super funds, but none of them are interested in responsible, sustainable investment anyway. Having seen the fall-out from a badly planned “marriage” between EISS and LGS during his tenure at the fund, Robertson says any future partner would need to share a focus on sustainable investment. “At the moment that compatibility doesn’t exist and if we sat down with a merger partner it would have to be with someone who thought the same sorts of things we thought,” he says.
*CORRECTION: This story originally stated that Craig Turnbull is chief executive officer of LGS. In fact, Turnbull is chief investment officer of the fund. Peter Lambert is chief executive officer.