Sunsuper aims to make 5 per cent profit after costs. If it gains more, it considers how this money can be used to improve services, Hartley says. “If a commercial organisation makes 10 per cent, it asks how it can make 20 per cent next year.”
Alternatives
In August 2011, when Sunsuper’s investment committee carried out its annual review of the fund’s hedge fund investments, the portfolio had returned 5.8 per cent in the previous three years. Its cash benchmark notched 4.8 per cent, while the hedge fund-of-fund index published by HFR posted 2.2 per cent.
Sunsuper aims for minimal market exposure, or beta, from its $1 billion in hedge fund investments. It draws advice from hedge fund consultant Aksia to select individual managers rather than invest in hedge fundsof- funds, which oversee portfolios of strategies.
“If there’s too much beta, we get rid of it,” Hartley says. The fund currently invests with 17 hedge fund managers, most of which are based in the US. It has also mandated Oaktree Capital Management, which manages about US$85 billion in distressed debt assets, and Lone Star Funds, with about US$33 billion under management, to seek investments arising from European banking reform.
Basel III regulations, which are forcing the region’s banks to hold more liquid assets, are causing them to trim lending books. “Borrowers have been able to maintain their repayments, but they have to find new money. There is an opportunity for direct investors to step in,” Hartley says.
