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Investment update

01 February 2019

Find out more about some of the investments in our portfolio.

 

Australian share portfolio

Local Government Super (LGS) invests in a wide range of Australian shares and employs seven local firms to manage our $2 billion Australian share portfolio. They are all ‘active’ managers aiming to invest in the best Australian companies.

All of our fund managers take long-term sustainability risks into account when making their investment decisions.

One of our best, and longest serving fund managers is the Colonial First State Global Asset Management (CFSGAM) Small Companies team. This team has managed investments for LGS for more than 12 years. Over that time, the CFSGAM Small Companies team have produced a return of 8.1% per annum, compared to the benchmark of only 1.3%.

Below is a brief overview of one of the small companies in our portfolio, Bellamy’s Australia Limited. This company has been one of our best investments over the last twelve months.

Bellamy’s Australia Limited

Bellamy’s was founded by a Tasmanian family in 2004 and they produce a range of organic food and formula products for babies, toddlers and young children, with over 30 products in their range from birth to early childhood.

Their organic products have been certified by the National Association for Sustainable Agriculture Australia, the nation’s leading organic certifier. This means:

  • No Chemical Pesticides
  • No Chemical Fertilisers
  • No Artificial Additives
  • No Hormones
  • No Genetically Modified Organisms

In October 2018, Bellamy’s reported annual results which included:

  • Revenue growth of 37%
  • Profit growth of 67%

These results were driven by sales in Australia, as Bellamy’s is still waiting on registration to restart sales in China.

Find out which companies currently make up the top 30 holdings in our Australian share portfolio.

LGS direct property portfolio

LGS manages one of the most sustainable direct property portfolios in Australia through the Local Government Property Fund (LGPF). The LGPF portfolio comprises a total of eight properties across New South Wales including commercial office buildings, retail centres and one industrial property.

In the 12 months to December 2018, the LGPF achieved a return of 13.11%, which is 2.83% above the industry benchmark.

As at 31
December 2018
1 Month3 Months1 Year2 Years3 Years5 Years
 LGPF  0.54  1.28  13.11  18.21  19.45  17.94
 Benchmark *  1.34  2.36  10.28  11.86  11.83  11.74
 Excess return  -0.8  -1.08  2.83  6.35  7.62  6.20

Source: JP Morgan Custody Report / * Mercer/IPD Australian Property Pooled Fund Index / 4.8 Property

 

The LGPF aims to be at the very forefront of sustainability and environmentally responsible management by continually striving to improve our environmental performance.  For example, annual electricity consumption for the property portfolio has fallen by 45% since 2009. 

LGS is committed to using GreenPower across the entire portfolio including the tenants in all of our buildings.

By purchasing GreenPower, businesses commit their energy providers to purchase the equivalent amount of electricity from accredited renewable energy generators which generate electricity from sources like wind, solar, water and bioenergy.  These types of energy generation have no greenhouse gas emissions.

GreenPower Tracking

Our aim is to have 100% of tenants in our buildings signed up to GreenPower, and we are progressing well in our commercial and industrial properties.

However, in our retail centres, while most specialty retailers are signed to GreenPower, major retailers such as Woolworths and Coles are currently not signed up as they have their own sustainability programs.

 As at 31
December 2018
Total tenantsTenants signed
to GreenPower
% of tenants
Signed
Commercial 55 55 100%
Industrial 13 13 100%
Retail 126 105 83%
Total 194 173 89%

Learn more about the buildings in our direct property portfolio.

LGS alternative investments

LGS invests in ‘alternatives’ and these include private equity and infrastructure. These investments earn long-term stable returns and are more insulated from the volatility of the markets.

Private Equity: Adamantem

Adamantem Capital is a private equity fund manager which invests in Heritage Lifecare, a business dedicated to full-time residential care for elderly New Zealanders. Funds are invested with the multiple aims of developing scale, best in class care outcomes and increased efficiencies.

In the current quarter, Adamantem reported progress on acquisitions, innovations in technology (for e.g. food optimization models) and greater efficiencies such as staff rostering.  Latest independent reports value the investment at 1.3 times the amount of money that was originally invested.

Opportunistic alternative: Centaur Property

LGS invests money in Australian real estate debt with fund manager Centaur Property. Centaur Property is a provider of loans to the Australian property development sector for property sub-divisions and development. Centaur have a track record of producing strong rates of return.

Defensive Alternative: EQT Infrastructure Fund IV

LGS invests with fund manager EQT which focuses on investments in essential services to society such as energy, transport/logistics, telecommunications and waste services. 

EQT is considered a leader in environmental, social and governance (ESG) risk management and they have a track record of producing excellent returns by actively managing the companies in their portfolio.

LGS is committed to a responsible investment strategy and you can take a look at our latest performance results.

Bellamy’s Australia Limited is one of the holdings in LGS’ Australian share portfolio. Colonial First State, Adamantem, Centaur and EQT manage funds on behalf of LGS. Please note that Bellamy’s, Colonial First State, Adamantem, Centaur and EQT or its products and services are in no way, sponsored, endorsed or administered by or associated with LGS.