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BlackRock

Last Updated : 28 May 2010

www.blackrock.com

AGEST and BlackRock 

AGEST has employed BlackRock to manage some of the Absolute Return, some of the Australian Fixed Interest and all of the International Fixed Interest investments for the fund.

Absolute Return

AGEST employs BlackRock to manage a small portion of the fund's assets using an "absolute return strategy".  We have invested in the BlackRock ARS (Pension) III Fund (hereinafter referred to as the "BlackRock ARS fund").  Note that this used to be called the Quellos fund - BlackRock and Quellos merged in October 2007, with management of the fund in which invest being unchanged.

Objective and strategy

The objective of an absolute return strategy is to generate consistent, positive returns each year with a low volatility of returns.  The investments are usually structured to produce low correlation to equity and fixed interest markets.

The BlackRock ARS fund is a "fund of funds" which means that it invests in a wide range of different investment managers who use different investment strategies to make money.  By combining many managers and investment strategies into the one fund, the BlackRock ARS fund has a low chance of a negative return in any year.

The specific objective of the BlackRock ARS fund is to generate total returns in excess of the yields on short-term US Treasury securities, irrespective of the performance of any particular sector of the global capital markets.

The fund seeks to achieve its objective by capitalising on inefficiences in the global capital markets through an allocation of the fund's capital to multiple external investment managers who pursue a variety of absolute return strategies.

Fixed Interest

AGEST invests in the BlackRock Wholesale Indexed Australian Bond Fund and has established an individually tailored investment portfolio for international fixed interest investments.

BlackRock Wholesale Indexed Australian Bond Fund

Objective
To provide investors with the performance of the Australian Bond market, before fees, as measured by the return of the UBSWA Composite Bond All Maturities Index.

Strategy
To match the distribution of the risk and return factors of the index.  Factors considered in matching the index risk and return include:

• interest rate risk, including coupon and maturity
• covariance risk, including co-movement of interest rates and spreads
• specific risk, including individual security price risk.
  

BlackRock International Fixed Interest Portfolio

AGEST employs BlackRock to manage a segregated portfolio of global bonds.

Objective
The Portfolio’s investment objective is to provide a total return that exceeds the total return of the Barclays Capital Global Aggregate Index hedged to Australian dollars. 

The Portfolio seeks to achieve its performance objective through the taking of active risk versus its benchmark index in strategies based on areas including, but not limited to, the following:
– duration;
– yield curve selection;
– sector (eg. credit) selection;
– issuer; and
– country, security and currency selection.

The Portfolio’s benchmark is hedged back to Australian dollars. BlackRock may, however, take active currency positions relative to its fully hedged benchmark subject to certain restrictions.

Strategy
The Portfolio is actively managed within a rigorous risk management framework. The Portfolio is continually monitored and, where necessary, adjusted to suit changing economic and market conditions.  Great importance is placed on research and a team based approach to making investment decisions.  The investment process is focused on accessing the best ideas of BlackRock’s fundamental global fixed income team.  

BlackRock seeks to add value by managing duration, yield curve, and sector (eg. corporate, mortgage backed, agency debt, etc) and individual security, country and currency exposures against the benchmark.  In seeking to access a broad array of enhancement strategies, BlackRock utilises proprietary research-based knowledge, fundamental macroeconomic and credit, sector and security analysis.  The management of risk is central to their investment process.  The BlackRock team reviews the Portfolio’s exposures on an ongoing basis to ensure the Portfolio maintains a risk/reward profile appropriate to changing market conditions and the degree of confidence the team has in their return expectations.