TCorp is one of the most prolific investment managers in Australia, investing capital on behalf of State Super (a superannuation fund) and NSW Generations Fund (a sovereign fund), among other clients. We were delighted to speak with Mr. Stewart Brentnall, its Chief Investment Officer, and Ms. Alexis Cheang, its Head of Investment Stewardship, about TCorp’s portfolio, strategy, and goals.
[GSWF] TCorp is NSW central borrowing authority and manages the capital of its generations fund and superannuation funds – how is all this coordinated?
[TCorp] TCorp works closely with NSW Treasury to provide the capital needed to finance the state’s policy priorities and budgetary needs. TCorp is organised around two core business areas:
-financial markets, responsible for the state’s debt raising / borrowing program, and
-investment management, responsible for managing c. AU$120 billion of the state’s financial assets across diversified investment funds, designed to pay pensions, insurance claims and to fund infrastructure and other needs across the state.
[GSWF] Can you please walk us through the OneFund transformation and what it means for your different clients?
[TCorp] OneFund brought together eight separate funds to achieve amalgamation and improve operational efficiency, while bringing in line the risk levels of all eight funds within the Treasurer’s risk appetite. A more equity and real asset rich strategy for OneFund is expected to deliver an additional AU$ 400 million plus of annual performance over the longer term for the Treasurer.
[GSWF] Do you think Total Portfolio Approach can lead to superior returns as compared to Strategic Asset Allocation?
[TCorp] By comparison with a SAA approach, TPA is expected to deliver an additional 50-100bps of annual performance over the long term. TPA mitigates agency risk, by minimizing the number of sub processes and benchmarks in the investment process and by assessing new investment opportunities against the entire portfolio. All of these features are operated in TCorp’s TPA model, which is agnostic of sector allocations or objectives, and similar organizational design features that are common to SAA.
[GSWF] Two thirds of TCorp’s portfolio is invested overseas. What is the regional split and where do you see opportunities?
[TCorp] Our portfolios are well diversified across regions and sectors, and we see two influences from the current environment. Firstly, a small rise in cost of capital / risk premium for investing in US assets and secondly, a catalyst for Europe and UK to strengthen their focus on improving efficiency and productivity in their economies. We still see attractive opportunities to invest in US infrastructure but are more equivocal on the prospects for the US dollar, so we have diversified our currency exposures into a more defensive basket. We are exploring a number of attractive infrastructure opportunities in Continental Europe and Asia. We are less convinced about the prospects for Emerging Markets, as these are the principal areas of trade deficit (and tariffs) with the US.
[GSWF] What % of your portfolio is invested in private markets, and what asset classes are you currently focused on?
[TCorp] As of 30 June 2024, TCorp invested over AU$20 billion in unlisted property, infrastructure and “opportunistic” assets. As we continue to look for high returning illiquid investment opportunities, we are especially interested in value-add opportunities in infrastructure and property in developed markets outside Australia. Our December investment in Euroclear, is an example of the kind of illiquid opportunistic investment outside Australia that we find attractive and more of which we are seeking.
[GSWF] How does TCorp align with NSW's 2050 net-zero goal?
[TCorp] TCorp is well aligned with the NSW Government’s ambition to achieve net zero portfolio emissions by 2050. The NSW Government holds the policy and regulatory levers required to drive emissions reductions across the state’s economy, while TCorp investment’s net zero ambition applies to its portfolio of global stocks, bonds, alternatives and real assets. TCorp’s ability to influence that outcome is primarily through capital allocation, rather than through direct emissions reduction. As such, our net zero ambition is dependent on global policy support and corporate actions to decarbonize all sectors.
