AGEST -
Australian Government Employees Superannuation Trust
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Investment Consultant
The following is an outline of the fund's investment process and the role of the investment consultant in this process. The Trustee of the fund is responsible for the investment management of the fund's assets, however the large size of the fund means that we need to outsource the two key aspects of investment management - the investing itself and the advice from an expert on who to invest with and how to structure our investment portfolio. The first step is for the Trustee to appoint an investment consultant. We do this by conducting a tender of the investment consulting market and selecting the firm that we believe best suits AGEST and its members. Frontier was selected in June 2000 to be the fund's investment consultant and continues in that role today. The second step is for the Trustee and the investment consultant to discuss and decide upon a suitable investment policy and strategy. For example, do we only invest with one investment firm or many? do we invest in just Australia or also overseas? do we have just one investment option for members or many? These are just some of the many inputs to producing a robust investment policy with investment objectives and strategies to meet those objectives. Frontier has been a key contributor to the development of our investment policy. Having established an investment policy with objectives and strategies, the third step is to select investment managers and products that we expect will help us meet the objectives we have set for the fund. This is where Frontier's deep knowledge of the investment management industry becomes crucial, as their knowledge and insight helps us appoint the best available investment managers for the fund. An important part of selecting investment managers is to ensure that the fund has sufficient diversification by style of investment management. For example, if we only used Australian shares managers who invest in just (say) 20 stocks, then there is more risk of volatile returns to members compared to using managers who invest in (say) 80 stocks. This does not mean that investing in just 20 stocks is unwise, it means that we need to have a variety of managers if we want to reduce the volatility of returns to members. Frontier is continually reviewing potential investment managers in all investment sectors for all their clients, and they will recommend to us appropriate managers to suit our strategy. Once managers are appointed, the fourth step is to continually review the investment style and performance of each manager. Frontier assists us with this review on a quarterly basis, with more frequent review if there is a concern with any manager. Finally, our investment policy is formally reviewed once each year (or more frequently if new market conditions warrant an earlier review). Frontier assists the Trustee with this review. If changes in the investment policy do occur, new or altered investment management arrangements will be implemented with Frontier's assistance.
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