Successfully reported this slideshow.

150918 From coal mines to Collins St AFR

286 views

Published on

  • Be the first to comment

  • Be the first to like this

150918 From coal mines to Collins St AFR

  1. 1. anywhere from a Queensland coal mine to an office on Collins Street. The fund has a distinct bias to growth assets, a reflection of its comparatively young workforce. It also offers enhanced insurance options, including a partial disability or ill-health benefit, which acknowledges the higher-risk vocations of many resources workers. Members can choose to invest in individual asset classes or one of its four pre-mixed options. It does not offer a "balanced" option and 65 per cent of the fund is invested in the default growth strategy. The tilt towards growth assets goes some way to explain the strong performance, but it also creates a direct link between the fund and the average self-managed super fund because SMSFs are typically growth orientated and contain plenty of shares. Another similarity between Rio's fund and your garden-variety SMSF is that its exposure to the sharemarket is 100 per cent active. Rio pays fund managers to look after both its local and international equity exposures, which runs counter to the trend of institutions swapping active for lower-cost : SMART PEOPLE From coal mines to Collins Street The strategies employed by Rio Tinto's top- performing staff superannuation fund can and should be explored by self-managed super fund members, writes James Frost. I t's an open secret within the superannuation industry that the best performing funds are run byinsiders. Over the past 10years the super funds run by and for the employees of Goldman Sachs, the Reserve Bankof Australia and Commonwealth Bankof Australia can be found among the top five performing funds of almost any given year, according to data collected by the Australian Prudential Regulation Authority. But in 2013-14, a fund run by a company not normally associated with high finance broke ranks and stormed home with a 13.8 per cent return - muscling its way into fifth spot in the process. That fund was Rio Tinto's S5.3 billion staff super fund, chaired by managing director Phil Edmands. "We like to keep things pretty simple," Edmands says."We are seeking consistent returns that are a little bit better than the market and we hope that will lead to significant outperformance over time." The 70-year-old fund has more than 30,000 members who work across Rio Tinto's Australian operations. The fund caters to a broad mix of staff who could be working Page 1 of 3 18 Sep 2015 Australian Financial Review, Australia Author: james frost • Section: Smart Investor • Article type : News Item Audience : 57,243 • Page: 6 • Printed Size: 754.00cm² • Market: National Country: Australia • ASR: AUD 13,184 • Words: 858 • Item ID: 467169657 Copyright Agency licensed copy (www.copyright.com.au)
  2. 2. index or index-enhanced strategies. "Wehave been able to find active managers with the expertise to add value and sowe don't have any plans to move to passive at this point," Edmands says.Riogives mandates to a small number of Australian equity managers including Balanced Equity Management, Fidelity, Paradice Investment Management, Integrity Asset Management and Renaissance Asset Management. The fund has close to $500 million invested with Andrew Sisson's Balanced Equity Management. BEMis well known for two things: its comparatively small "Fund managers are people too; they can't be perfect every day of every month of every year. We look at things over the long term and understand that they need some leeway. We are notjust flipping between managers." Perhaps the best measurement of the fund's success is its high take-up among Rio staff. About 21,000 staff members from a pool of 23,000 havejoined, with an additional 10,000 former employees and spouses also choosing the fund. "In terms of the feedback we get from members, we are highly regarded and they like what we do," Edmands says. "When Istarted working for RioTinto nine years ago, I got some professional advice about whether Ishouldjoin the fund. They [took a] good look at it and told me that I wouldn't do better anywhere else. Ihaven't looked back since."H management fee and its ability to consistently beat the index without shooting the lights out. This philosophy dovetails neatly with the fund's aims. Fund managers are selected by the investment committee in conjunction with asset consultants JANA, a subsidiaryof National Australia Bank. The performances and processes of fund managers on the roster are then reviewed regularly. "We certainly keep close tabs on what they are doing. Our internal team and JANAare both very hands on in this respect," Edmands says. "If a manager had a process that we liked and that changed we would seekto review that. If there were staff changes that concerned us then we would look at it as well. Sometimes you come across a manager who is unequivocally better." Achange in investment process at the global investment firm GMO,founded by respected investor Jeremy Grantham, is believed to have led Rio Tinto to dump the manager. GMOran a mandate worth $164 million for the fund during 2014-15. Members of Rio Tinto's staff super fund will be informed of the change in managers when its annual report is distributed in : coming weeks. Edmands says Rio takes a long-term view and it seeks to avoid switching managers if possible. WE HAVE BEEN ABLE TO FIND ACTIVE MANAGERS WITH THE EXPERTISE TO ADD VALUE AND SO WE DON'T HAVE ANY PLANS TO MOVE TO PASSIVE. Page 2 of 3 18 Sep 2015 Australian Financial Review, Australia Author: james frost • Section: Smart Investor • Article type : News Item Audience : 57,243 • Page: 6 • Printed Size: 754.00cm² • Market: National Country: Australia • ASR: AUD 13,184 • Words: 858 • Item ID: 467169657 Copyright Agency licensed copy (www.copyright.com.au)
  3. 3. «• I ; ^ ^ *--r PROFILE Phil Edmands e: Managing director, Rio Tinto Australia Other roles: Chairman of Rio Tinto Staff Superannuation Fund Page 3 of 3 18 Sep 2015 Australian Financial Review, Australia Author: james frost • Section: Smart Investor • Article type : News Item Audience : 57,243 • Page: 6 • Printed Size: 754.00cm² • Market: National Country: Australia • ASR: AUD 13,184 • Words: 858 • Item ID: 467169657 Copyright Agency licensed copy (www.copyright.com.au)

×