The $12.8 billion GESB fund, responsible for the superannuation of Western Australian public servants, wants to increase the diversity of its portfolio, investing more in infrastructure and different types of debt and credit.
Acting chief investment officer Steven McKenna says the fund is looking for different risk exposures in the overall portfolio and is interested in increasing exposure to what he describes as “medium risk” asset classes.
“Internally we look at our asset classes as low risk, medium risk and high risk. Equities and property sit in the high risk category and bonds and cash in the low risk category but where we feel we are underweight at the moment is the middle, the medium-risk category,” McKenna says.
“We are looking to introduce asset classes like infrastructure, where we don’t have any investments at the moment, and perhaps other types of debt that are not investment grade, such as emerging-market debt and private debt, where we also don’t have any investments.”
The fund, which manages the superannuation of more than 320,000 members, also recently announced a major overhaul of its fixed-income portfolio, providing four new mandates, worth $2.28 billion, to three managers.
The new mandates evolved from GESB splitting its fixed-income portfolio into global government bonds and global investment-grade bonds.
The big winner from the review is incumbent fixed-income manager Wellington Management Company, which was awarded more than $1.1 billion in mandates.
Pimco Australia, while holding on to a mandate for $427 million to manage part of the global investment-grade bonds, saw its total funds under management fall from more than $900 million.
“Pimco also had a global aggregate-bond portfolio with us and they now have a focused-credit portfolio. We think Pimco is very good as well, that is why we are staying with them,” McKenna says.
As part of its investment strategy, McKenna says the investment team focuses on maintaining the overall liquidity of the fund.
Non-liquid assets like infrastructure would have to fit into an overall liquidity budget that aims to keep illiquid investments to a maximum of 15 per cent of the overall assets.
Along with these so-called tertiary assets, secondary assets that can be liquidated in less than three months can make up a maximum of 15 per cent of total assets. While what the fund describes as primary assets, which can be liquidated within seven days, must make up between 70 and 100 per cent of the total assets.
Private equity currently makes up 5 per cent of total assets in the largest balanced fund and listed and unlisted property make up 10 per cent.
