“Long-standing members of the investment committee have seen economic cycles, have travelled the globe and seen it from a business perspective,” Hill says. “It’s very important to have that stability so that you can continue to execute an investment strategy and have the courage required to be different.”
Internal investing
REST began investing cash and fixed income securities itself in 1997. Its internal investment team, led by George Zielinski, now includes 15 people and manages almost $1 billion in cash, about $900 million in fixed income, around $800 million in unlisted property and approximately $400 million in infrastructure. It also performs rebalancing and currency overlay. “More and more is being ceded to the internal investment arm,” Hill says.
Managing unlisted property and infrastructure assets directly is integral to the fund’s investment strategy. These assets, which are bought to provide income that is linked to inflation for many years, can help provide steady income as REST’s members age.
“With our demographic, we are going to be long-term holders of property and infrastructure assets,” Hill explains. “If you’re going into these investments in a big way and going to be in charge, you really should manage them yourselves.”
The team’s $3.1 billion of funds under management is below the 25-per-cent limit of fund capital that it is allowed to invest. For the $16.9 billion that is not managed internally, REST seeks managers that can remain effective as the fund grows. These managers must “grow with you,” according to Hill, and the fund must ideally be able to reserve the right to continue investing with them in years to come.
“Larger funds face the problem of appointing managers who close to new money. And as funds continue to grow, you have to ask whether the managers are sufficiently sized to keep moving the needle.”
