Cbus Super’s recent renewable energy deal with the Dutch Infrastructure Fund (DIF) aligns with its new direct infrastructure investment strategy, which brings an increasing portion of its investment capability in-house, chief executive David Atkin says.
The plan is to create a hybrid model to deliver the fund’s investment strategy, Atkin explains.
“Our internal capabilities are designed to work alongside our existing externally managed funds,” he says. “Based on our current forecasts, we expect to be internally managing more than 30 per cent of the fund’s assets in five years’ time.”
Cbus’s internal expertise includes asset allocation, international and Australian equities, infrastructure, direct lending, quantitative investment strategies and responsible investment.
Atkin says 11 per cent of the fund’s portfolio is allocated to infrastructure; of this, it’s looking to have more than 15 per cent in directly owned investments by 2021.
Cbus launched its internal global equity strategy last October, with $400 million managed by a seven-person team using a bottom-up, fundamental approach. The strategy is not purely related to cost reduction, Atkin says.
Cbus used its internal expertise to team up with DIF in obtaining an 80 per cent equity interest in a portfolio known as Bright Energy Investments (BEI) this April. The other 20 per cent will be held by West Australian Government-owned electricity retailer Synergy.
The investment in BEI brings together assets that have differing risk-return profiles, offering a return within the market range of 9-12 per cent, Atkin says.
He adds that environmental, sustainability and governance (ESG) issues are critical to the fund’s assessment of long-term value and are included in its investment decisions.
“Our focus is on maximising risk-adjusted returns for members and we consider ESG factors to be important, amongst many factors, that need to be incorporated into decision-making,” Atkin says. “This has led us to consider how we can contribute to the United Nations Sustainable Development Goals (SDGs) through our investments, active engagement and how we operate as an organisation.
“It’s about using our long-term investment capacity to deliver sustained value – for our members today, for their retirement tomorrow and for the world their children and grandchildren will inherit.”