Watch the latest webcasts from our Chief Executive Officer, Chief Investment Officer, Chief Economist and investment managers to stay up to date on how Sunsuper is managing members’ investments, as well as the objectives, construction, holdings and performance of our asset classes.
Good morning, listeners, and welcome along to the final in our webcast series of deep dive adviser broadcasts. My name's Mark Stubbings and I've got the pleasure of being your host today. And let me just recap briefly on what we're doing. Obviously, in these tumultuous times it's pretty important to be open and honest about your assets, how they're performing. So we've come up with this webcast series, to quite literally to deep dive into our various asset classes, to talk about their performance, the construction, how the decisions are made regarding the composition, et cetera.
Today, we're actually talking about our listed asset class, which is a little bit different to our previous webcast. But shortly I'll introduce our speaker for the day and the speaker today is Greg Barnes. And I'll give you a proper introduction shortly. Prior to this one, as mentioned, we've actually focused on the unlisted asset classes. And if you go to our website under the tab Adviser Webcasts, what you'll see is a number of webcasts based on our unlisted assets.
And we've touched on things like property, infrastructure, alternative strategies and our private capital. As mentioned today, we're looking at equities option, our listed assets. So what you can expect today, I'll introduce Greg Barnes shortly, but Greg is actually going to take us through a foundation style presentation. And what he will do is he'll talk about some important parts which will underpin, obviously, the questions. What we'll do after Greg's presentation is we'll actually deal with some questions we've already received and we have received a number. So Greg's obviously had the benefit of being able to prepare for those. And he has some answers already. We'll then pass over to our live webcast live questions on our webcast.
Just in terms of legal responsibilities, we have a disclaimer to address. Obviously, today is general information, and it's not designed to look at any person's specific circumstances or individual goals.
Let me now introduce Greg Barnes, our speaker today.
Greg is obviously the manager of our unlisted assets, sorry listed assets, and he joined Sunsuper in 2014 after 30 years looking after portfolios. And you sort of think, yeah, he's probably got a pretty good handle on that. Greg has had some fairly senior roles with AMP and RHB. And also, interestingly, when he started his career, he was actually a geologist and exploration geologist looking for oil and gas and we have an interesting chat a bit earlier. From an academic point of view, Greg has a bachelor of science and an MBA.
So, ladies and gentlemen, just to discuss the foundation presentation, let me pass over to Greg Barnes.
Thanks very much, Mark, and good morning, everybody. If you look at the first slide there, you can see that the listed shares asset class has around 32 and a half billion dollars invested in it, and it makes up the major proportion of our portfolios. So as much as two thirds of the major diversified options.
In addition to that, we have a number of single asset class options which comprise 100 per cent of shares or equities. I'm sure that most of you are familiar with with equities. It's the principal growth asset that we have in our portfolios, and it generates returns through both the capital appreciation showed, so the share prices going up, but also it pays dividends. And those dividends, certainly in Australia, attach franking credits, which are also a benefit to our members.
But it's a very risky asset class. It experiences high volatility, but over the long term, it generates the highest return. And we only need to reflect on the experience that we've had over the last 12 months to really appreciate that, that fully. We use the broadest benchmarks in our portfolio. We really want to give our portfolios exposure to the widest returns possible in listed shares. And we think about it in two key segments. So Australian shares, so shares listed on the Australian Stock Exchange and then international shares.
And we split that down into both developed markets and emerging markets. And then importantly, all of our listed shares are held in segregated mandates. And that's important because those securities, unlike a fund or a fund structure, do not leave the super vault. So we have total control over those assets at all times, which adds some interesting advantages to us in terms of our ability to lend stock and split those assets over time. And turning to our investment approach. We use an external manager model that really allows us to access the best managers globally.
We focus on manager selection and portfolio construction. They're the two key things that we think about; identifying the best managers globally and then bringing them into our portfolio in a way that delivers our portfolio objectives. So the two key things that we focus on a day to day basis managers selection and portfolio construction. Our goal is to create a really efficient and scalable investment approach, one that stood in good stead as we've doubled our AUM from around 30 to close to 70 billion today.
And going forward, we expect to see that to double again. So we really want to ensure that we've got something that works today and will work tomorrow. Our strategy is really to maximize after tax alpha for the fee spent and the risks we take. That's the little equation that we looking to solve on a daily basis. And importantly, we're really trying to create a broadly diversified portfolio that doesn't have exposure to any one particular risk factor. So any one style factor or any one geographic factor. Really what we want to see is the stock selection skill of our active managers coming through into our portfolio.
So if you go into the next slide, this really shows our strategy on a page. I won't go through this in detail, but a couple of key highlights. As investors in equity markets, we get paid for taking risks. So what are the key risks that we can take? We can take market risk or beta risk. We can invest in common factors, so think geography, think industries or even style factors so value, growth, momentum and so on.
And it's quite easy to access those factors. And because that skill is not that rare, it's also very cheap. So we try and save money by investing in those key styles and those key approaches and then save me a little bit of money to invest in fully active or idiosyncratic managers. So these managers are the ones that are very much focused on picking stocks, making significant bets in their portfolio, deviating away from the index. But finding managers that are really skilled in that space is difficult.
So I think that that skill is very scarce and therefore very expensive. So we don't have a lot of it in our portfolio. And that's really the framework that we use on a day to day basis.
So if we turn to the next slide. This starts to explore the portfolio in a little bit more detail. So what we're showing here are each of those big style buckets, so passive, idiosyncratic and fully active or managers and then the managers that we have in each of those different sleeves.
So we're trying to identify the best managers globally. We don't want to have too many, but we want to have enough to give us diversification in each one of those portfolios. So diversification along different style lines and avoiding high correlation in those portfolios. So if you look at the Australian active managers, a lot of these will be familiar names. So Maple Brown Abbott, a great value manager; we've had a relationship with them for over 20 years. Then, as I said before, each one of those managers we have a discreet mandate with.
So that means that we can tailor that mandate so that it meets our individual needs and requirements. And then, as I said before, those shares really don't leave our vault. And that's important when we think about things like tax management and particularly investing in some of the off market buybacks. And that can add significant value to the portfolio. And it also allows us to include various exclusions and other ESG considerations into that portfolio. And then you'll notice that Vanguard, the passive component, comprises a reasonably large chunk of each of our portfolios.
So that gives us the beta exposure or the market exposure in the portfolio. Because of the scale of our relationship with Vanguard, we're able to achieve that very, very low costs. The only other point I'll make about this slide is that the way we've structured each one of these portfolios, Australian equity, developed markets and emerging markets is in a modular way so that we can mix and match each of those different slices to create various products along the way, not only for our big diversified portfolios, but also for our segregated single asset class options. So think our passive equity mandate where we just use the Vanguard portfolio to provide that.
If we go on into the next slide, we really think about who are the best of the best managers that we can access, and this slide just sets out a couple of examples. So Baillie Gifford is a high growth manager based in Edinburgh in the U.K. They manage a portfolio and our developed markets, asset class. These guys are really trying to identify, using deep research, using a team of very skilled analysts and portfolio managers, they're looking to identify companies that have a long growth to rise.
So they think 10 years into the future, how big can these companies really get? Not necessarily concerned that much about value, but thinking more about growth. So it's not surprising that the portfolio that they develop includes names like Amazon Alphabet or the former Google Tesla, the electric car company and some of the Chinese tech giants. So think of Alibaba. But their portfolio is highly concentrated. They pick those stocks, they want to hold them for a long time and minimize turnover.
Pzena, on the other hand, is a deep value manager. They're based in New York, and they run two mandates for us. One in our developed market portfolio, one when our emerging market portfolio. That's important because we get a big scale benefit by doing that. So Pzena's approach is really to identify companies that are relatively cheap, undervalued companies in the market. They use deep research to identify those companies. They spend a lot of time analyzing them. They might be out of favor with the market, but based on their research, they think they're good value.
And over time, the market will reflect that value in rising share prices. So when we look at the Pzena portfolio, we see names like General Electric, Honda, Lenovo, which is the company that bought the IBM laptop and peripheral business a number of years ago, and Samsung, one of the biggest chip and electronic device manufacturers globally. Again, a low turnover, quite concentrated portfolio, but they spend a lot of time thinking about diversification because of the risks in investing in stocks.
And lastly, Vanguard. So, as I mentioned before, Vanguard manage our passive portfolios across all of the three sleeves that we have. They have a global presence, but they have a very strong representation in Melbourne, here in Australia, it's where they have their Asia-Pacific headquarters. Vanguard managed portfolios in each of those sleeves. They use a full index replication model. So that means they hold all of the stocks, nearly all the stocks in the portfolio and they're able to leverage their tremendous scale globally to drive very low costs.
So it's not only a key part of their process, but it's also a key part of the organisational culture and philosophy. And we benefit from that. Importantly, because we have discreet mandates with them. So these are tailor-made mandates with them. We can ensure flexibility in those portfolios. And as I mentioned before, it allows us to really maximise the tax benefits from that portfolio, which are able to pass on to our members in fully after-tax returns.
So if we go onto the next slide, this looks at the portfolio, each of the different asset classes based on active sector exposure. So what is the portfolio's exposure to each one of these industry segments compared to the benchmark? So are we overweight a sector or are we underweight a sector? So in each of those three panels, we have the three different asset classes. So on the left we have Australian equity. You can see that it's a portfolio that's overweight in materials and energy.
So our managers in their stock selection, in the portfolios that they're managing for us, are tending to favour, at the moment, materials, energy and some consumer discretionary stocks. So think of this is a more cyclical portfolio. So they're expecting economic growth and recovery to continue based on those industry exposures. What are they, underweight? They're underweight financials, so underweight the big banks. And that's been a common exposure and portfolio for a number of years. Australian banks, as I'm sure many of you know, are amongst the most expensive globally.
So our managers are underweight that sector, but also underweight health care. So think companies like CSL, which is very expensive. Developed markets, a similar sort of style, so our managers in their stock selection tend to be overweight, consumer discretionary materials and also financials. So global financials tend to tend to be more cyclical stocks. So very similar to cyclical pattern in our emerging market, in our developed market portfolio sorry. They're underweight IT. And again, I'm sure many of you are aware that some of these IT companies are incredibly expensive.
So they tending not to hold as many of those in their portfolios and also underweight consumer staples stocks. If we then look at our emerging market portfolio, which is in the right hand panel, somewhat different, you can see that it is overweight technology stocks. So our managers in emerging market are able to find companies which they think are attractive in technology. Let's talk about this in little bit more detail later on. Some of the stocks they hold tend to be more traditional tech names.
So think of semiconductor manufacturers and semiconductor manufacturing equipment, but also some of the very large Chinese tech giants, which are incredible companies, but not nearly as expensive as some of those US tech companies. If we go on to the next slide, this looks at our portfolios, our international portfolios in terms of their active geographic exposure. So the same concept. Are we overweight or underweight, a geographic region. If we look at the people on our left? International equity, you can see down the bottom that we're underweight the US.
Our managers in building the portfolio have tended to be underweight America just because of its incredible expensiveness and overweight Asia ex-Japan, including some of the Chinese companies that are now with the US Stock Exchange and also overweight Europe. So when you think about our developed market portfolio, I guess I always tend to think of it as underweight US overweight Europe. But if we look at our international equity portfolio on our emerging market portfolio, on the right hand side, we're overweight, emerging Europe.
So I think peripheral European countries, but also Russia, the former the former Russian economy and then also Turkey. And then interestingly, we're underweight Latin America. So predominantly in Brazil, but also underweight China. So our managers, when they build their portfolios, tend to have less exposure to China in emerging markets. And if we go to the next slide, the sort of companies that our managers are overweight or underweight in the portfolio tend to reflect their investment thinking.
So typically thoroughly researched investment ideas which they put in their portfolios. And the way to read this chart is to think about it is our active exposure in the portfolio. So the deviation away from the benchmark. So we look at the Aussie market. You can see that, as I mentioned before, most of our managers are underweight Australian banks. So they tend to have less exposure to companies like CommBank and Westpac in their portfolio. Also, CSL, which is a very expensive stock, tends to figure less prominently in our portfolios at the moment.
On the other hand, we're overweight Boral, which is a company that some of you may be aware of, is going through a change in leadership, tremendous value in that company, which we think will be unlocked as that organisation restructure is going forward. And then smaller companies like Healius, which our managers think is one of the better, broader health service provider companies in Australia. In the International market, again, no surprises amongst some of the names there, Microsoft, Apple, but also some of the emerging new retail companies like Shopify, some of the China giants, Tencent, which is one of the largest social media companies in China, and then also Illumina, which provides human DNA testing equipment, which is one of the leaders in that space in new medicine going forward.
In our emerging markets again, I'm sure some of these brand names will be familiar to you, Samsung, TSMC, which is one of the largest manufacturers of semiconductors around the world. So TSMC produces the chips that go into cell phones, a massive range of products, and then some more traditional companies. POSCO, Korea's largest steel manufacturer, one of the lowest possible manufacturers globally, ICICI Bank, which is one of the leading consumer banks in India, and Lukoil, one of the largest producers of oil in Russia.
And finally, just how have we performed? This chart looks at the performance over the last five years or so. So the way to read these charts across the three panels for Australia, developed markets and emerging markets that it's indexed to 100 around five years ago. So we've represented each of the key styles sleeves in those portfolios. The yellow line is our passive sleeve. The purple line is our systematic or quant sleeve. And then the dashed line is the fully active managers.
And then this just represents the excess return that each one of those sleeves are producing. So how much alpha are we getting from each one of those strategies? Just a couple of things to highlight there, we can see that in pretty much each one of the asset classes, so Aussie shares, developed, emerging markets; our passive manager was doing what we expect so they're generating the market return or a little bit better, you can see that our quant managers have been doing reasonably well.
So, less volatile, but more sustained performance. Although in emerging markets you can see that our systematic sleeve there over the last 18 months has really struggled. And that reflects some of the difficulties that quant managers have experienced everywhere. We've seen a high correlation between two of the key factors that they normally invest in. So value and growth. So because there's been less correlation, the alpha they've generated hasn't been as strong as we would normally expect.
Then we can look at the dashed line, which is the fully active managers. We can see that they've done very well in terms of their excess return developments over time in both the developed markets and in the emerging markets. But in Australia, you can see over the last 18 months or so, they've really struggled. So active management in Australia has had a really tough time over that period. And it reflects a couple of things. It reflects the fact that markets are being driven more by interest rates.
It reflects a very narrow market leadership in Australia. So only a small handful of companies are generating excess return in Australia. And that makes it very difficult for active managers to really get the right diversification across the portfolio if they're not exposed to those stocks. And then I think the final point is they're incredibly expensive, those stocks that are driving the Australian market. So CSL, Afterpay, for example, are incredibly expensive and our managers think they're overpriced, have tended to underweight them.
But as a result of that, the performance has lagged. Then next to the charts, you can see the dark blue line. That's the combined performance of each of our portfolios. And what we're trying to do over time is really produce a very diversified portfolio that generates a little bit of alpha over time. And you can see that's what we've been able to achieve using our approach. So that's the last of the slides I had and the last of my prepared comments.
Thanks, Greg. And there's some pretty comprehensive explanation there, which ha actually covered lot of the questions that I had and also we've been getting coming in by the live webcast. But perhaps I can ask you one, Greg, and then I might go over to Ali to ask one of the live questions, what are the advantages of going to having to, say, a passive mandate with Vanguard as opposed to going via one of the Vanguard funds?
Yeah, it's a good question, mark.
I think there's a number of advantages, but principally one of them is using our scale to achieve a much lower price with Vanguard than you would achieve if you're just investing via their funds. So we were able to drive the cost of the mandate down to very low single digit basis points. And that's reflecting our style, our scale, rather, and the relationship, the size of the relationship we have with Vanguard. We don't pay any spreads, as you might experience in a fund. So there's no spread. We you know, our portfolio is really just transacting it at the the base point and then we can tailor make those mandates. So as I mentioned a couple of times during the presentation, we're able to achieve high levels of participation in off market buybacks, which generate significant upside for our members. And that's something that a passive Vanguard trust, for example, wouldn't do. And then we're also to ensure able to ensure that we have various exclusions in that portfolio.
So, as you know, our portfolios exclude tobacco, that excludes non-conventional weapons and they also exclude the worst forms of human slavery. So it's that ability to customise the portfolio that's important. And then we have the benefit of our strategic relationship there as well. So our ability to do good research, to use a lot of their engagement capabilities. So there's a wide range of advantages we have through that direct relationship with Vanguard, as opposed to using the ETFs or trusts.
Thanks, Greg. Good comprehensive answer. What I'll do now is pass over to Alessandra. We might, given the time, be able to squeeze in a couple of our live webcast questions, Ali. So would you like to pitch a couple of those to Greg, please?
Yes, Greg, we've got a question about changes in our managers. Have there been any recent changes? And generally, how often do we change our managers?
Ali, we really try and minimise turnover in our portfolio because of the effort and the work we go through to identify the best managers globally, to negotiate with them, and then the process of actually setting up the segregated mandate in all the plumbing that goes in place, we really try and avoid changing our managers, you know, wherever possible.
Obviously, if there are issues with a manager, then we'll look at that. So things like changes in their business model, key team members leaving and then sustained under performance, particularly over a longer term? You know, three years or so is the period that we would we would look at.
And as I said, we have relationships with managers that have lasted many years. So Maple Brown Abbott is several decades, the same with Tribecca, another small cap manager here in Australia, multi decade relationship. So we really try and have a small number of managers, but long term relationships. Having said that, here in Australia last year, we terminated the manager where they had significantly changed their business model, had moved away from a focus on institutional asset management, which is what we are, what we we value to a much more retail oriented model.
And we felt that really compromised their business. So we terminated that manager. And given the research that we do and the ability for us to have a strong bench of managers ready to use at any moment in time, we're able to very quickly move that money from one manager to a new manager. So that was a lesson learned for us, our ability to have a strong bench and our ability to move very quickly in terms of transition from one manager. Because we have individual mandates, we can make changes very quickly, literally within a couple of days, so we can move very quickly as a result of that.
And occasionally we'll need to change managers based on portfolio construction needs. So a couple of years back, we had a manager that was in our systematic sleeve, so quant manager, and we felt that the style was something that we didn't need; they used a long - short model, it was expensive. It really didn't fit within our portfolio construction. So we again removed that manager or actually was able to take that that funding and move it into an existing manager.
So, Ali, second question.
Sure, on a scale of cheap to expensive, how are equity markets valued the minute?
Look, they look expensive all around the world on average, you know, but I think they're certainly getting up to, you know, I would say maybe an eight, seven or an eight if I had to to make that judgment. But, you know, we live in a relative world, so our managers are always looking at what is relatively expensive and what is relatively cheap. We're trying to avoid what is relatively expensive and invest in what is relatively cheap, believing that over time, relatively expensive will come down and relatively cheap will go up.
And we see that in the stocks are managers are buying. We see it in our portfolio exposure. So, you know, we're underweight tech and a lot of countries we're overweight some of the more attractive, more attractively valued sectors. We're underweight US, for example. So I think, you know, I said that relative mix that we focus on, but, you know, on an absolute level, yeah, it's it looks like an expensive world, but there are reasons for that.
Excellent, thanks, Greg. And look, time is not our friend and ticks on, but maybe in terms of a concluding comment, Greg, could I maybe get you to give a little bit of a pitch to our adviser audience?
Why would they recommend our listed portfolio to their clients?
Thanks, Mark. I think, first of all, you know, our approach really provides access to some of the best managers globally. As I said, we spend our days trying to identify the best managers we can around the world. It doesn't matter where they're based. We seek them out. And we have a very structured process to identify those managers, engage with them, build relationships and ultimately bring them into the portfolio. So we're not a we're not a small team internally trying to manage stocks.
We think that using an external model allows us to access the best managers and build very, very diversified portfolios. So I think that's that's a key differentiator. That's a key point of importance. I think we build a very diversified portfolios. So as I said before, we think about building a very broadly based portfolio that doesn't have a concentrated exposure to one particular country style or particular sector, one particular risk. So we build a portfolio that's very well diversified.
Of course, we want to add a little bit of alpha through that process, but we don't want to spend a huge amount of money to do that. And we don't want to bet the farm to generate that alpha. We think that having a strong focus on risk really helps us to construct very robust portfolios that can scale and grow with us going forward. So, you know, I think about that is providing great value for money. I think that that's a key differentiator for us.
I think also, you know, Sunsuper's culture is very much member focused, member first. We really strive to do the best thing for our members. And in listed shares, we think about that in terms of making sure that there's full alignment between our managers and our members. So how do we do that? We have fee structures that ensure that, you know, if a manager is doing well, we reward them. If they're not doing well, we don't reward them.
We have very low base fees to ensure that we get good value for money, that the lights are kept on, that they are able to employ good people, but we're only going to pay them if they perform well.
And then importantly, here in Australia, we've moved to a full after-tax performance benchmark. So that means that all of our managers now are aligned with member outcomes because members get after-tax returns. So having all of our members, all of our managers, rather, on after-tax performance benchmarks means that they think about generating after tax outcomes because that's how they get rewarded and those very same after-tax outcomes as after-tax returns that go to our members.
So I think that's also an important differentiator for Sunsuper and something that as an adviser or somebody that's using Sunsuper products, I think that's what differentiators us.
Excellent. Thanks, Greg. Very comprehensive answer. And thank you also for your presentation and your answers today.
Ladies and gentlemen, time has come. So I'd like to thank all of our listeners for dialing in today. And also, if you've dialed in for the broadcast in the past. Couple of references; if you go to our website, we've got a COVID site which has a whole lot of resource material for the crisis. And secondly, the previous webcasts, which obviously focused on our unlisted assets, are available at the adviser webcast tab there. What can we expect from today? You'll receive a copy of this recording along with a survey for CPD points. We'll also follow that up with another survey just to see whether this particular series of webcasts hit the spot and how we can improve any future ones or other events.
Ladies and gentlemen, thank you for joining us for the series.
We hope you got some value out of it. And I trust you enjoy the rest of your day. Thank you.
Good morning, ladies and gentlemen, and welcome along for our next Financial Adviser Deep Dive Webcast. My name's Mark Stubbings and I have the pleasure of being your host today. And as you'll recall, we've been running these webcasts for a very specific reason that is around providing openness and transparency in regards to predominantly our unlisted asset classes. In previous webcasts, we've literally peeled back the onion on property, infrastructure and also private capital. If you want to access copies of those recordings of those webcasts, we have recordings on our website, the Sunsuper website under the tab of Adviser Webcasts. Today, we're actually going to be looking at our alternative strategies and with m shortly I'll introduce our speaker today, guest speaker Bruce Tomlinson who is the head of Alternative Strategies. Just to give you a little bit of a anticipation of what's coming in the future. The final webcast, because today is four and a series of five, the final webcast is actually on a listed assets space; it's our equities, including our index options. Let me give you a little bit of an idea of what to expect today. What we're going to do when I introduce Bruce, Bruce is going to lead us through a foundation presentation on obviously alternative strategies. It'll be a little bit of an anchoring presentation and it will form the basis for Bruce then next, to consider some questions that we've already received from a broader audience. And Bruce has obviously had the opportunity to pre-prepare some answers and some slides. After that, we're going to go to live questions, and I have with me in the studio today Will Burke and Will is going to curate the questions for me. And we're going to present those to Bruce. Please put your questions through. We'd look forward to answering those or Bruce will look forward to answering those. And if we don't get to all of them because of time, what I can promise is the business development team will follow up. So please put your name, your e-mail address and we'll certainly follow you up to answer those questions.
Just in terms of the housekeeping, if you look at the bottom right hand side of your screen, there is a small speech icon there; use that to answer your questions, ask your questions. And as I say, we'll get through as many as we can. Also, if you have any technical difficulties, there is an "i" icon there as well, which you can press for any technical assistance. Just by way of a disclaimer, today is obviously a general presentation and it doesn't focus on any specific individual's goals or financial circumstances.
Let me introduce Bruce Tomlinson. Bruce is head of Alternative Strategies at Sunsuper and joined the organisation in 2007. Bruce has actually had 30 years in investment, 21 years as a Portfolio Manager. So you sort of get the sense he's probably got the hang of it by now. Aside from Sunsuper, he's also had some time at AMP Capital and others. And when you look at his geographic footprint, he's been in London, Boston, Sydney and Melbourne, which is pretty impressive. From an educational point of view, Bruce has a post-grad certificate in management, an MBA, a bachelor of architecture, which we sort of thought was a bit strange, but there is a reason for that. And he's also a CFA, a chartered financial analyst. Bruce also serves on the Investment Committee of the Future Generation Investment Company. So, ladies, gentlemen, I'll now pass over to Bruce to talk about the foundation presentation. Thank you, Bruce.
Thank you, Mark. It's my pleasure to be with you all this morning on this webcast. So Alternative Strategies is almost a four billion dollar portfolio of alternatives at Sunsuper, and it makes up between five and eight per cent of the diversified options that your clients invest in. And we we characterise alternative strategies as having a number of a number of features or characteristics. It includes a mixture of liquid and illiquid securities, there can at times be some concentration of the assets.
Interestingly, there is both long and short exposure. The portfolio does invest in multiple asset classes, so it invests in both equity and credit securities. And specifically, we're targeting a illiquidity and a complexity premium over and above traditional public market assets. So as I mentioned, it is both both public and private securities, and it is an opportunistic portfolio. There is a core focus on credit investing, And I'll talk a bit about the exposures and the strategies below that. And then we have we have some diversifiers to balance that out in certain sectors, such as equity, long short and in macro investing. Next slide, please.
So the alternative strategies portfolio invests both in pooled or commingled funds, so we're investing with other other investors in a portfolio or fund. And we also invest directly both via co-investments and then direct individual assets. As I mentioned before, it is an opportunistic or idiosyncratic type portfolio. We are looking for capital constrained, outcome oriented situations. So a situation where Sunsuper's capital can help affect an outcome and help drive a return outcome. We do access globally the best managers globally and we focus very much on the people running those firms and the alignment with with those people. So, for example, we want them to be invested alongside us to have a significant amount of their own net worth invested with us. We also look at the incentives and the alignment. As I said, we prefer and have a majority of the investments where performance fees are what we say is back-ended.
So that fee isn't paid to the manager until the investment is realised and that there's also a hurdle over and above which they need to deliver return before they're paid their performance fees; so that improves the alignment. The benchmark is essentially cash, US cash, we do have a have an outperformance target of four per cent and this is, after all, fees and expenses. Next slide, please.
Now diversification is a key part of the portfolio management process. We're diversified in a number of ways. Initially, it's by strategy. And so this slide shows the different components, the strategy components of the portfolio. And as I said, credit is a is a core focus. About 70 odd percent of the portfolio is currently in credit, but that is very diversified. So there's a mixture of public and private credit and a mixture of of investments, either in funds or directly. And so this slide, you can see that there's 20 percent in co-investments and another 10, 11 percent indirect investments.
And we do those more direct investments for a number of reasons. The alignment is better, generally speaking, because we are upsizing or co-investing with the manager in their highest conviction positions in general. We also get lower fees through co-investing and direct investing, significantly lower fees than in a fund. There's more transparency and ultimately there can be more control for Sunsuper and even some governance rights in some in some instances. So that's why we do the co-investing and direct investing. So credit is a core. We then balance that out with some diversifiers. Macro is something that Sunsuper has done for 12, 13 years. So Macro is investing in rates, FX, commodities at times, long and short positions. And then equity long short is also a diversifier, the diversifiers are generally more liquid than the credit and advanced special situation investments. So that blends out the liquidity and the opportunity set. Next slide please Will.
So again, more diversification and this time it's by geography. So as I mentioned, it is a globally oriented portfolio. There's only less than five odd percent in Australia. A lot of the capital is in North America, as you would expect, given the size of their capital markets. But it doesn't dominate the portfolio. It's 45 percent; so 55 percent is outside of North America. There is a fair bit of investing in Asia, particularly North Asia, China specifically, and then another 20 odd per cent in European opportunities.
So well diversified by geography. Primarily developed markets, but some to some extent emerging markets as well. Next slide, please. And then the third aspect to diversification is by industry sector. And this chart shows just how diversified the program is. There is no industry sector that's more than about 20 percent of the exposure. Those two, those largest exposures are in real estate; industrials, which can include transportation, which sorry does include transport assets (Aviation, shipping, etc.). Utilities is another sector where we have utilities, sorry, and energy, so energy and power. That's 12 odd per cent and then there's smaller exposures to a bunch of other things, including consumer, healthcare, financials, etc.. There is a bit of a focus on real assets, things like real estate, energy, transport, but it's well diversified. And so the last slide in my little set piece shows our cumulative returns, our performance over the last 12 years. And we have we have achieved that that performance objective of cash +4 net of fees, the COVID period, the first quarter of this year was a challenge, but the performance has started to recover. And so we look forward to recouping those losses in the next year. So I'll hand back to you, Mark, for some questions, please.
Thanks, Bruce. That was very informative thank you. Now, let me ask you a question, Bruce. And these are the ones that we've obviously received beforehand. So we've been able to prepare for; hedge funds are pretty high profile, but there's a perception that they're expensive, that they haven't performed well. How would you reply to that Bruce?
Sure. Good question, Mark. So the portfolio has evolved over the last 12, 13 years since we set it up back in 07. It was predominantly hedge funds a decade ago, it isn't predominantly hedge funds anymore. In fact, it's only about a third of the capital. And yes, to your point, Mark, performance has been mixed. Fees have been high. Performance is uncertain, but fees and expenses are a certainty. And so we have we have decided over time to gradually shift our capital away from those hedge fund sectors predominantly and move into some of the areas that I mentioned in credit in particular. We've found better opportunities really since the GFC and into the 2010s as banks have pulled back and had additional regulatory capital constraints placed upon them. They have been less willing to fund various companies. And so these bank replacement credit strategies have been a place where we have shifted some of some of our members capital. And we found that in general, those slightly longer duration credit investments have had lower fees. They have had performance fees over a hurdle and also performance fees that have been when investments have been realised. So what we call back ended fees they paid later rather than sooner, which all ends up compounding to higher returns for Sunsuper's members. So, yes, we've responded to mixed performance in higher fees and hedge funds by shifting capital away from that space. And an example I think is I think you have on the screen there Will the Norske Skog paper mill. That's one of seven paper mills in this company, which is in Norway, the company is based in Norway, but they have seven paper mills in Europe and Australasia, Australia, New Zealand. So this was an investment, which is a credit investment. It's through a manager based in London. This business, clearly paper manufacturing paper for newspapers and magazines, is in structural decline. The company was over levered. Their debt traded down, became what's called distressed. This manager bought this debt. The company went through a bankruptcy and a restructure. There was a debt for equity swap. And through the manager, we ended up owning this company, it was private for a while. It was rehabilitated. The balance sheet was fixed up, and then it was IPO'd in the in the third quarter of last year. And we made a nice profit on on that investment. We sold down some of the exposure in the IPO, we've still retained some exposure. It's quite an interesting company. While you might think that manufacturing paper for newspapers is a dead industry. What you can do with a paper mill is actually convert it to fibre board, which is a constituent part for cardboard boxes. And of course, cardboard boxes is a growth industry because people are purchasing from from Amazon and shipping goods to their homes. And so it's an interesting company. And we bought into it at a cheap price and through that restructuring and IPO process of generating good returns from members. So that's an example of it's not a hedge fund strategy, it's more of a special situations credit strategy.
Fascinating, interesting story Bruce. The alternative set; there's a lot of opportunities, pretty large for obvious reasons. Do you think you have sufficient resources to take advantage of that Bruce.
Yes. Thank you, Mark. Yes, look it it is a wide opportunity set, and I think one of the slides on the geographic exposure showed we had about five percent in Australia, Ninety five per cent ex Australia. So it's a very global portfolio. The team, we were very fortunate to add to our team in February, just before the shutdown, and so the team is now four dedicated full time professionals. We hired someone with a credit specialisation. They'd worked at a insolvency restructuring firm. And so they really add some depth to our credit underwriting. In addition to the four dedicated in my team. We work very closely with the Private Markets team, that's Michael Weaver's team; some of you would have listened to the previous webcast on those other alternative asset classes.
And Michael's team has another 13, 14 people. And we worked closely together. For example, if we're looking at a real estate credit or an infrastructure credit, we will work closely with Michael's team and one of their team members will join us to help underwrite that investment and to help really challenge the pros and cons and to make sure that it's the right investment. And then we look at it on a relative basis across different opportunity sets and different asset classes.
So the team really is bigger than just the four. In addition, with resourcing, we do work with a number of advisers. We we have a specialist alternative's advisor called Axia. We also work with the StepStone Group for some of our real assets. And then finally, if we make a direct or co-investment,we can engage technical, legal and accounting advisers to help us underwrite that investment, if we're going to take a direct stake and end up owning a piece of that company directly.
So there are, we think we have sufficient resources. And then I guess the only thing I'd add, Mark, is that we do select managers who have who have a global reach. So they're not just in one or two places. For example, we have a manager who is based in Hong Kong, but this manager has another seven offices in the Asia Pacific region. They've got two offices in mainland China being Beijing and Shanghai. Just as COVID was happening, they sent one of their key people from Hong Kong to Shenzhen who's been based there for the last four months, and this person can now travel freely within China to look at some of the real estate assets that we've invested in there in China. And so having managers that are that have enough capacity and enough breadth and depth and having local offices means that even with the lockdowns and COVID, the managers still have that ability to visit assets and to engage directly, face to face with counter parties before before making important investments.
And sorry, I should point out, so there is a slide. So this slide shows the Tel Aviv Stock Exchange. And just quickly, that one was, I guess this shows the breadth of the investments. This was through a manager, a specialist manager based in New York ,who has done a number of investments in financial exchanges, investments in things like the ASX and Deutsche Borse and the London Stock Exchange and the New York Stock Exchange. So they had a capability in exchanges and the Tel Aviv Stock Exchange was a mutual. It was basically owned by a bunch of Israeli banks and it was essentially a private company. The securities regulator in Israel wanted the exchange to to step into the 21st century and to facilitate capital formation and capital raising in Israel and to allow companies to grow. And so they said we want this mutual demutualised and two to be brought into the 21st century with with better governance and with a more efficient capital structure and to improve the services and to facilitate the growth of the Israeli economy.
And so through our manager in New York, we invested in a small piece of this company when it was going through the demutualisation process, which was quite complicated, and then ultimately, this company IPO-D late last year and I'm pleased to report it is trading very well. They've increased turnover and trading activity, which increases the fees paid to the exchange, and that business has performed very well. Being a public company, it did it did drop during during the initial sell off with COVID. It's now actually above its pre- COVID price level because it continues to trade and deliver good performance results. So that's an example, I guess, of the breadth of the portfolio and the diversification of the portfolio.
Fascinating story. Thank you, Bruce. I'm not going to pass over to Will Burke. Will has been obviously curating the live questions, so Will, over to you for some live chat.
Excellent. Thank you, Mark. And there's a question that's come through and it's really a point of clarification. Bruce, can you just confirm or I guess clarify the diversified alternatives investment option as opposed to the alternative strategies which you're the portfolio manager for?
Certainly will. So the diversified alternatives option is a diversified option. It has target allocations of 35 per cent to private capital, private equity we also call it, 35 percent to infrastructure and 25 per cent to alternative strategies, including hedge funds. And then five percent is cash. That should add up to one hundred.
So the Diversified Alternatives option has has a component of the portfolio that me and my team manage being alternate strategies. So sorry for that confusion.
Thanks, Bruce, for clarifying that. And a question that we get all the time as a BDM team, so I'm glad it's being asked. It's just around our valuation process for alternatives or for hedge funds and including the frequency and the independence of those valuations.
Absolutely. So Will, this portfolio is a mixture of public and private assets. It's roughly 50/50 at the moment in that mix. The public assets can obviously be valued daily. And for those investments that we've made, we receive monthly valuation statements from the administrators of those funds who are independent of the managers. In some cases, we do get estimates during the month, weekly and mid-month estimates, but they go into the unit price monthly; it's my understanding. The private assets, we receive formal valuations from the administrator of those funds or the manager on a quarterly basis. In some cases, we do a monthly roll forward of that valuation to include expenses and interest accruals. And so the portfolio is a mixture of monthly and quarterly valuations. As I said, the portfolio is highly diversified, both by strategy, by geography and by industry. And so those valuations are coming through all the time. And so it is you know, there isn't one asset that's that's going to dominate the valuation and I think that the largest asset is about nine percent of the portfolio.
And referring back to that first question, alternative strategies is 25 percent of the diversified alternatives option. So no member would have an exposure more than if they were 100 percent in diversified alternatives, which is unlikely, they wouldn't be more than 25 percent in this alternative strategies portfolio. So highly diversified mix of monthly and quarterly valuations.
Bruce another questions has come through. Just regarding the opportunities in the market for alternative strategies and the hedge funds, especially in the COVID environment we're now in. What are the opportunities like at the moment?
Sure. Yes, very good question. So, look, there's no doubt we're still really in the early stages of of of this kind of COVID world, I don't even want to call it post- COVID because we're not, clearly not in a post-COVID world. So we do tend to think, though, that equity will continue, sorry, sorry credit will continue to be a very rich opportunity set. You know,when there's economic stress and fundamentals are struggling in general you want to be a more senior part of the capital structure and credit should do better than equity in a kind of distressed or recessionary environment. And credit is a core part of what we do. Like I said, 70 percent of the exposure and we've hired specifically to boost our capabilities there recently. In terms of the credit opportunities said what we saw in March and into the second quarter was particularly in the public credit space, so in high yield bonds and bank loans, the market priced down and gapped down in line or in the same direction as equities, it didn't fall as much as equities, but it did fall.
And then it somewhat recovered. So that first phase really was sort of stressed, public credit, having having various issues. People concerned about credit quality. People concerned about whether bonds would be downgraded. And the corporate's ability to repay that debt, their debt obligations. What we think will happen now as we move into the second phase, which will probably go from now for, you know, a good year or perhaps longer is there'll be refinancings of capital structures.
In some cases, there'll be sort of rescue financings where, you know, there might be haircuts on some of the existing debt will be repriced. Some debt might become equity in order to reduce the debt burden for those corporates and help their ability to repay those obligations. So there'll be some refinancing, some rescue financings. And then we'll probably move into a third phase where there'll be, you know some more stress, bankruptcies, defaults.
I appreciate that we are seeing that, you know, in a few pockets right now. Obviously, we're all aware of the Virgin Australia bankruptcy. And there's there are some bankruptcies in some other select areas, but we think it's going to take a while. You know, 6 to 12 to 18 months before we really see some of that sort of second order effect coming through. And so we'll be looking to invest with existing and perhaps some new managers who have broad capabilities to invest across that sort of credit opportunity set to move from stressed into distressed over time, managers that have the capability to to work through restructurings, to lead creditor committees in in bankruptcy situations, to be able to bring in capital, including our capital to help make an outcome such that we can generate good returns on that capital over time.
So that's the way we see it unfolding over the next couple of years. But it is still, there's still a lot of uncertainty out there.
Excellent. Thank you very much. Bruce, I'd love to get to a few more questions, but we are running out of time, so I'll hand back to Mark.
Thanks very much, Will. And Bruce, just before we sort of wind up; time is running out, maybe I can get you to just summarise thoughts, your thought in a nice succinct way. Why would alternative strategies be good for advisers and more importantly, their clients? What what would be the compelling arguments Bruce?
Okay. Thank you, Mark. Look, I would summarise the why would you do it question. There's a few reasons we expect to get a return premium. Otherwise, why do it? That return premium would should come from the illiquidity and the complexity of these assets and this opportunity set. So there's a return premium over traditional public assets. They these investment opportunities are also diversifying in that they can invest in sectors and in companies that are often not found in the public markets.
And that diversification will reduce the volatility overall of your client's retirement assets. And then finally, the general these are these are actively managed strategies and that active nature should generate some additional value over and above, you know a more passive approach. So really, it's about a return premium diversification and reduced volatility. And when you put that as a building block into a broader portfolio, as Sunsuper does in the diversified alternatives option or in the balanced growth other diversified options. It can help deliver higher risk adjusted returns for your for your clients.
Excellent. Thanks Bruce. And Bruce also,appreciate your time today, the explanation and obviously dealing with our questions.
I'd also like to thank our listeners for dialing in for today's webcast. And just a reminder that obviously there's a suite of resources on our website. We'll actually put the link up fairly shortly on the slide. And also all of the previous webcasts are on the website, as I mentioned, under the tab 'adviser webcasts'
What to look forward to from here? There's one more webcast in this series to go, which is on our equity holdings, including our index options, which we obviously saw through Vanguard. If you want to register for that, there's going to be an email coming out shortly. That email will send you a copy of today's recording. It will obviously give a link to register for the last the series. Also importantly, it will contain a survey so that you can complete that to claim your CPD points.
So, ladies and gentlemen, Bruce, thank you very much for listening today. We appreciate your time. Enjoy the rest of the week. Thank you.
Good morning, listeners, and welcome to this, the third in our deep dive webcast series. My name's Mark Stubbings and I've got the pleasure to be your host this morning.
If you've joined us for previous webcasts, you'll recall that up until now we've already done two. We've had the Property webcast, our first broadcast, followed by our infrastructure and the recordings for those are actually on our website. If you care to check out the Sunsuper website, you'll find them under the adviser webcast tab. Or alternatively, you can contact the Business Development team and they will be more than happy to help you.
Today, we're here to discuss private capital. And what I'm going to do is introduce our speaker shortly, James Lilico, who is the Portfolio Manager. What is the purpose of these webcasts? The purpose of these webcasts is obviously to give a deep dive into some of the asset classes that Sunsuper invests in. We live in particularly troubled times. Obviously, we have a COVID crisis and the economic consequences of that. We're trying very, very hard to be very open and transparent with regards to our assets, because obviously we receive a lot of questions as do most other fund managers.
What have we coming up? What we've got coming up after today's webcast, we've actually got two further ones. One will concentrate on our alternative strategies and the one after that will concentrate on our equity holdings, including our index options. What to look forward to today, just in terms of an agenda? What I'm going to do, as I mentioned, is introduce shortly James Lilico, the portfolio manager. And James is actually going to talk through a bit of a foundation slide pack, which will give some idea of the objectives of the portfolio and holdings.
We then go on to some questions that we've already received prior to now and where James has obviously had the benefit of preparing for those questions. And he's going to walk through some, as mentioned, prepared answers. We're then going to go live to our live questions on the webcast. And I've got the pleasure to be joined today by Will Burke, who's going to curate the questions for us. If you care to look on your screen bottom right hand corner, there is the speech icon and you can literally submit live questions and we encouraged to do so.
Please, if you could. If we don't get to the questions because of the crush of time, please put on your name and email address and we'll make sure the Business Development team gets back to you to answer those questions.
Also, be aware if you have any technical difficulties, there's an "i" icon there which you can click on for that. Just in terms of a disclaimer, we are legally required to remind you that today is general information, obviously it doesn't deal with specific client situations or financial goals. Let me now introduce James, our speaker, James Lilico. James joined Sunsuper in 2010, and in actual fact, became the portfolio manager in 2018. After a pretty distinguished career with RMB Capital Partners and Grant Samuel. Obviously, James joined us. James has a Bachelor of Science and a master of science degree and is also a CFA. So now I'll pass over to James for his foundation presentation.
Thanks, Mark, for your kind introduction. We have roughly about almost five billion dollars invested in the private capital asset class, which represents about five to 10 and a half percent of our major diversified options. It's also 35 percent of the diversified alternatives option.
So what is private capital? Well, some investors will refer to it as private equity, which typically encompasses buyout and venture capital. We call it private capital because we're actually targeting a broader option deset. We essentially will, anything illiquid where we can expect to get a return that's at a premium to listed equities, we will consider for the private capital asset class. And if you look at a slide like that means that there's a broad variety of categories we can invest in.
Starting with Buyout, which is perhaps the most well-known of these categories. When the media refers to barbarians at the gate, they're typically referring to buyout, which is essentially using debt and equity to buy an established business with a view to growing the company and with a view to selling it or listing it in a few years time. A recent example of this would be KKR buying 55 percent of CFS off CBA Bank of the CBA next year. Venture capital or some sort of well-known sort of strategy where you're essentially backing entrepreneurs to start up new companies providing seed funding to get off the ground and grow the businesses.
So Google, Amazon, Microsoft wouldn't be where they are today without the backing of venture capitalists. An adjunct to this is growth equity. Growth equity is when you've got a company has gone through the startup phase It's been de-risked, it's more established, it might be profitable, but it needs additional capital to get to that next level, whether it's expanding it in new geographies, market segments or different like a different product sets. This is actually this has been an area that's been seeing a lot of fund raising growth over the last 20 years.
And one of the reasons why companies are able to stay private for longer nowadays, where historically companies have IPO taxes expansion funding. Now, there are a lot of private sources of growth funding available to them. So you can see companies that will stay private for a lot longer. And the IPO market is viewed more as a liquidity mechanism for those sort of companies. Finally, you have special situations and distressed debt. So this is when you have more mature companies who have got themselves into trouble, whether it's a cyclical downturn or they've got too much debt.
The special situation, investment investors and distressed investors are there to help by provide funding, whether a special cits investor might provide rescue financing or recap a company, or you have distressed investors who will purchase debt off existing lenders with a view that to convert that debt into equity to create a more sustainable capital structure for the business going forward. And with that more sustainable capital structure their equity should be worth more. There's all different types of strategies, but they all share common characteristics; they are typically unlisted.
The private and private capital being unlisted. They are illiquid investments. We're not expecting to invest in these companies and sell them one month later. When we do direct co-investment to a company we're underwriting of three to seven year whole period, when we commit, we commit to various funds that the managers raised to invest in these types of companies, that the funds typically have a life of 10 years plus as well. Now, that means that it's a long duration investment.
When we invest in these funds, they're typically blind pools. When they are, you know, we don't have control of what goes into them. We don't actually know what's going to go into them. It's about, you know, picking great managers who can find great investments to put into the funds. As such, the capital outflows over time are typically at the manager's discretion. They also tend to be concentrated portfolios. So the funds will contain about eight to 12 companies in each fund.
Finally, unlike property and infrastructure, this is a portfolio asset class. It's focused on capital gain rather than yield. So that's a bit of a little bit of overview. So why do we like private capital? So next slide. Well, as I've already said, we're looking to get a premium return above listed equity markets. And so we're investing in both equity or debt instruments. Secondly, private ownership allows us to access control positions and small and mid-cap companies, which is a more inefficient part of the market relative to large caps.
Also a faster growing part of the market. It's easier many ways to find companies that can grow from one hundred million dollars in value to two hundred million dollars in value, and it is to find a company that's worth 10 billion already and then try and grow that to 20. Finally, the structure of our private capital investments means the managers are strongly incentivized to grow value. Managers are entitled to performance fees, but that's only after they sell the company and return capital to investment and to investors.
As such, they're strongly incentivized to find great investments, grow them and then sell them, return the capital to us before they can actually collect their performance fee. In the same way they incentivize management teams within those companies to grow that value. And the management teams that the company does well can be very well rewarded. In terms of how we benchmark ourselves, we're targeting our performance against the MSCI ACWI IMI. This is hedged to Aussie dollars. We hedge all our investments.
We're not looking to play currency. It's more about the underlying performance of the investments. And it's a measure of rolling seven year period because these are longer duration investments. Finally, our KPI benchmark, it's a peer relative benchmark. It's essentially a private equity index composed of many, a lot of different private private equity investors, funds and co-investments. In terms of our own portfolio, if you look at onto the next slide in terms of geography, it's a globally diversified.
We have a globally diversified portfolio with less than 10 per cent in Australia and New Zealand, which is representative of the Global Opportunity Century. The majority of the portfolio is in the US. That's because it's the largest, deepest market for these private capital investment strategies. It also is the geography of the longest track record there. We have the exposure to Asia and Europe as well, and we're actively trying to grow our exposure to Asia to give us more access to those faster growing economies over time.
In terms of strategies which I've talked about, our portfolio is predominantly Buyout. That is primarily our main reason for that is because the largest part of the US, European and Australia markets is Buyout. It's also a large component of our co-investment strategies. It's harder to come. We will do some investments and venture and growth. But those are typically smaller investment sizes, venture and growth, and venture out to areas we'd love to grow our exposure to over time.
We're actively looking to grow them both as we grow. Asia is mainly a growth equity market as we grow our exposure to Asia. We expect our growth equity exposure to grow over time as well. Venture capital is another area we'd like to grow. Great exposure, but it's also the area where manager selection is the most important. Typically in venture capital, if you've got entrepreneurs, they want to be backed by the best venture capitalists because it does provide a stamp of approval for those entrepreneurs in terms of their business plan and the viability of their startup. So entrepreneur would like to say, I mean, backed by Sequoia Capital, it's a very, very well-known global v.c and it provides a great, attracts other funding from other potential funding sources. And so what happens is those venture capitalists, the entrepreneurs go to these venture capitalists, those venture capital, the best ones see the best deals first. They get the best deals, they build the best track records.
And the next generation of entrepreneurs then wants to be backed by the same venture capital and becomes a virtuous circle. So unless you can access the top tier venture capital firms, it's somewhere along an area you want to allocate large amounts to. We have been successfully allocated to groups like Sequoia. We also have been a backer of AirTree locally here in Australia. Terms of our sector allocations on the next slide. We've got a well diversified sector, portfolio by sector.
We're not looking to have too much concentration in any one sector, really, we're looking more at characteristics of businesses. Rather than saying, well, we want to have so much and consume more energy. It's more about finding defense, great defense business where we've got visibility, income, rather than looking, you know, trying to avoid sort of cyclicals businesses. And you can find those in all different types of sectors. In terms of our how our how we've actually done.
Well, the next slide we've got compare our private capital asset class performance against listed markets. Listed market is a blend of 50 50 Aussie and international, which is typical sort of equity allocation for investors here in Australia. As you can see, over time, we've managed to outperform those listed at proxy. There is a bit obviously a downtick at the end of the a lot of volatility with COVID. We actually preemptively reduced our valuations in the asset class ahead of what we thought the managers report for the March 31 quarter, Pleasingly as we were getting results in from managers, the results have actually been tracking ahead of what we thought the downgrade value would be, something which has been pleasing for us.
Finally, the last slide, this slide I love talking about because it does provide show one of the reasons why we invest in private capital. So we have a graph shows the number of companies listed in the US, according to the Wilshire 5000, Wilshire 5000 includes all US equities with readily available market pricing. So it's actually a very good representation of the US listed equity market. Over time, the number of listed companies in the US has declined quite substantially, almost halved. The last time that 5000 companies where in the Wilshire 5000 was almost 2005/2006.
So now, right now, they've roughly only about three and half thousand companies listed in the US. This is compared to the US economy, where there are over 100000 companies that have 100 or more employees. So there are a lot of smaller mid-cap companies that have never been listed and might never be listed. It provides ample opportunity set for private capital investment strategies to play in. So it really is. And that's proven out. You've got almost 10000 private private equity owned companies in the US now, and there's still ample opportunity for them to invest.
I mean, there are some people ask about dry powder within and like whether too much money being raised in the private capital investment strategies. Well, the private capital globally probably represents about six or seven trillion dollars US invested capital. That's compared to global listed markets. Total market cap of roughly 75 billion US, sorry 75 trillion US globally now. So investor capital is actually very small subset of the listed market, and it's then very probably even a small subset of the global unlisted market.
And on top of that, the dry powder is only about two or three trillion dollars on and on on top of that sort of six or seven trillion dollars invested. In terms of the actual deal sizes we're talking about as well, you know, the median buyout size in the US is 700, 200. There's 250 million US approximately in 2019 compared to medium market cap for the Wilshire 5000 in 2019 of about US 700 hundred million dollars. So we're really we're talking about deals that are a lot smaller than what's happening in the listed market. With that, I'm happy to go back to Mark for Q&A.
That's excellent. Thanks very much, James, very informative. I'll take the opportunity to just remind viewers that the Web cast is obviously live and the opportunity for you to submit questions. We have had the benefit of some questions been sent in prior to today's events, which has allowed us to prepare for these. So what I'm going to do is go to some of the pre-submitted questions and get James to comment on those. James, tell us a little bit about the due diligence process from, say, purchasing a particular asset in the portfolio.
Can you talk us a little bit through what's involved there, please?
Sure. I mean, this is one of the great advantages of private capital is we are allowed to do a lot more detailed due diligence on companies relative to what you might be able to do in say the listed markets. So we have like a little case study, of IntelliHub. Which is an investment, co-investment, direct co-investment we've made in our private capital portfolio. It's a local company. It is a carve out essentially from Origin Energy and it's a smart metering business.
So what this business does is that they install, they maintain and they record the data for various energy retailers of a smart meter. So as the old electricity meter in your house needs to be replaced, it gets replaced by a smart meter, allows for more efficient billing and usage of electricity in households. We're attracted to this business because they essentially signed very long term contracts with providers like Origin, AGL and other Energy Retailers. This is a deal where we actually co underwrote it with the manager.
The manager was looking to raise a new fund, but to pursue these types of investments. The fund wasn't raised yet, but this opportunity came along. So we they asked us and some other investors to help them warehouse the investment. So we took it like invested into it with a view that part of it would be sold down to the fund,when it was raised later and we would continue to hold a direct stake alongside that fund. In terms of that sort of DD process involved with that company.
It's very detailed. You start out, you have a lot of management, many meetings with management. You understand the strategy, what's happened, what they where they see the opportunities, the challenges, when the business allows, you know, the private equity manager to assess the management team, work out the gaps. Do they need to actually recruit or supplement that team or replace them if necessary? And then you have the various external consultants that are also brought in to help with the process.
So you're a financial DD that takes place. You bring in a big four accounting firm, KPMG, EY, PWC to do financial tax DD, looking at look at through their revenue, their earnings, cash flow, understand the level of working capital required in that business. Seasonality of earnings. What the true level of earnings is, are those one off earnings adjustments really one off or they should they really be considered part of the maintainable earnings of the business? On top of that, you get legal DD done by lawyers.
Look at all the sales contracts, employee contracts, liabilities, finance agreements, IP rights, you know, potential litigation liability. So you get a really good understanding of what that potential like like legal liability of the company might be. Then you bring another you bring in strategy consultants on to provide to commercial DD on the market, understand what the market opportunity is. You know, how the company compares to other competitors, how what opportunities there are to improve the operations of the company in terms of your other areas, things that they could do to make themselves more efficient or opportunities, they should target that they're missing currently.
Then on top of that, you bring in specialized consultants so you might have environmental DD that's done on industrial business to make sure that they haven't got some large environmental load ability that that people have missed that's sitting there. And one of them on a site say just say it. So special consultants as needed. So there's a very detailed process that it goes through taking you know, you're talking two to three months, essentially, a private equity manager becomes an insider because they're able to see really peek under the hood of the company and understand what's going on, where the the options are, where the potential threats are weaknesses, et cetera.
So this is why you sometimes see with the public, it's pretty hard when you see a public to private where private equity firm makes a bid on a company that if you're happening right now, like Village Roadshow, others where they're doing DD. So I take two, three months to really look into it before they firm up their offer. And able to make an informed bid for the company.
Excellent.Thanks, James. I guess the other contrary is that for every sale there is sorry for every purchase, there's a prospective sale. So talk me through a little bit around what's your exit strategy for PE, for private equity assets when you purchase them?
Yeah, like we look and talk about like the next one, like Tacala. This is an interesting business, actually sits within the fund. Any manager when they go into a new investment. And this is something we grill them on when they're obviously doing DD on the manager. But also when we're considering co-investment, you have to have an idea of the exit strategy, who's going to be the natural purchaser? What's the natural exit path of the business?
Are you likely if you're a software company? Is there a strategic gap there that you would like? You know, typically going to sell to. Is it a listing candidate, is it you know, would you be up sell to another private equity fund that's larger, ? That might be up to taking our growth even further. So this is this example here is Tacala sits within our funds in the couple of funds, action us with one of our managers.
It's the largest Taco Bell franchisee in the US. It's got over 300 franchisees. They bought it very well. Now there's they bought it for like five and a half times earnings, which is, you know, relative, very cheap relative to what the listed comps trade at. It's great business, great free cash flow, 20 percent profit margins. The return on capital is fantastic. The growth story here is actually to open new stores. It's cost about half million us to open a new store, terms to cap ex.
And once you get back, it gets to run rate earnings of about 300,000 earnings. So your return on capital employed is incredibly high. So they can open nine, fifteen to fifteen stores a year, make great returns, throws off a lot of cash. This business like at some point. Yes, there's a lot lot of people who could actually buy it. There's actually you can go considered can sell on to another private equity firm is attracted to the cash flows.
You can consider it a sell out to what sovereign wealth fund or even a pension fund. Who is attracted to the, you know, to get the strong distribution cash flows. Right now, this business is already over seven years in terms of just by dividends alone has returned four and a half times the original investment. This is without even selling any bit of equity. So literally just distributions every June four and a half times what the manager has put into it.
It's actually an investment where I talk about the three three to seven year hold period. This is one where they might hold for 10 years because it'll literally it'll just keep throwing off their cash distributed until the last until the fund life. It's pretty much almost over. That's when they look to sell and realize it for that. And it would be to one of those. Another private equity fund or a street buyer or if it's large enough, they might even consider listing it.
Excellent. I've got to say, James, that when you mention Taco Bell, I was doing my impersonation of Homer Simpson might be a little bit of rdrool, but let's not worry too much about that. So perhaps the last piece, which was a persistent question, what's the valuation process for private equity?
Sure, there's that like value. These are typically done quarterly evaluations. There is a valuation lag. So what happens is the quarter ends and then the private equity managers will look at how the company's performed and then conduct a valuation based on, obviously, the company performance up to the end of the quarter.
There are a variety of measures that they do it the way they do it. It's typically manager valuations. There are some managers who use independent valuers, but it's typically a manager evaluation. And the way they do it is based on look at the listed comps, listed comparable transactions, sorry, comparable transactions. They do some DCF and then what will happen, so, you know, do you take your comparable companies to comparable transactions and they'll typically apply a discount to that of about 15, 20 percent for illiquidity.
In many ways, yes. It is obviously it's managed to do it, but they are only rewarded when they sell the companies. And that is the ultimate test of value. What they can actually sell it at. And that's how they are rewarded. As I said, they don't get performance fee until they sell the company. And it's not it's actually not in their interest to overvalue a company on the books because it's actually it looks. But they look at. More common, actually, what happens is when they sell the company, they say, oh, actually, we're sort of 15 percent above what we held on the books because all of a sudden you're selling it at potentially the listed comps trading. We have just gotten to that point that they prefer that situation than coming counting on to a guess and say that actually we sold it for 10 percent less than what we were holding it at. And in that case, you know, we only we're only paying them the performance fee when they sold it and they returned the cash to us.
Excellent. That's good. Thank you, James. Now, the good news is, is that we've actually covered off a few of the live questions anyway with some of our pre-prepared stuff. But I'll now take the opportunity to pass over to Will for any live questions, James.
Yes. Just a quick question that has come in, and that is how is private capital performed relative to other alternative assets in the post COVID period?
Yeah, well, I guess the post COVID period is really only a month and a half.
We're looking at our portfolio. We're tracking in terms of how the actual company is performing terms of liquidity earnings. We're it's measuring potential risk in the portfolio. Pleasingly, most of our portfolio is really I would say, if you look at it, green, amber, red. It's typically mostly a majority of portfolios are green, we've got about 10 percent red where there might be liquidity issues. But most of the companies are well capitalized. They, in terms of returns, in terms of how the rebound is, actually the portfolio pleasingly has done very well.
Talk to managers and some of them actually like that Taco Bell example, 70 percent of their business was drivethrough. And so they had it when COVID hit, they had to shut down 30 percent of the business in the US, the dining part. They were able to keep all staff staff that they know able to make cost cuts, but they didn't actually furlough any staff. They were able to maintain positive cash flow because 70 percent was drive through, which is still open.
And even with the dine in shut and reliant only on drive through, they're actually now back above their budget where they were budgeting pre-COVID, which is we have a great, great outcome because when dining opened, hopefully that means performance improves even further. We've had some medical, we local to local healthcare companies that were struggling a little bit when COVID first hit because people were afraid to go to the doctor or pathology lab, which have come back very, very strong as a result.
When you are with you, whether it's COVID-19 testing or people obviously need to get back and actually go back and visit the GP. So we're kind of pleased with sort of saying it's not like airports where I guess airports here. Who knows when they could reopen. We've got very little sort of exposure to that part of the market, transport or tourism or travel. It's mainly being more defensive and stuff like the industrial and IntelliHub. Well, that, you know, smart meter and just carried on, as was that.
Seventy five thousand meters installed in Q1 of this year. And then a lot of the sectors we look at, I.T. software, talk to the managers, a lot of them actually continue to power on some of this stuff in the software business. Mission critical. You're not going to shut it down. Not going to stop spending on that just because because people still need to work from home.
Thank you, James, and another question has come in from Vincent.
And that is with the amount of dry powder sitting on the sidelines, how hard is it to actually put capital to work? Is it competitive for the buy up strategies of private equity companies?
It's no doubting that buyout has become more competitive over the years. There are a lot more players playing in it. I mean, good example, software buyouts are big. There have been a lot of software. I.T. software is now where 40 percent of deals done in private equity and private capital. If you look back and say 2010, 2012, there are only about 10 firms that specialize in software. Now they're about about over 50 specialized software buyout. So the market over time, as strategies are proving successful it attracts more competition.
It's no longer a case where everyone, anyone ever read Barbarians at the Gate. Back in the 80s for private, we really started out with more about buying low selling high can't really do that anymore. You've got to pay a fair price now and you got to look to find a way to grow the companies, grow the earnings streams, find opportunities. Yes. Whether it's buying or growing organically or other ways to expand the business organically. Or do you have to buy new competitors and sort of buy and build sort of big strategies, bolt on to grow the earnings base that won't get synergies to create value.
So it is more competitive. Managers, ultimately, what's happened is that people become more specialized. So you have got more sector specialists to say, you know, I know health care. That's my area. That's why, like I have my networks, I'm blessed with being able to create value because it's all they do or this thing. Food manufacturing, private equity funds. This software, there is telecommunications, industrial services, GPs that manages to sort of focus on certain sector in order about great value, where they have industry advisers, consultants, in-house consultants to help them find ways to drive value within companies.
Yes, it has become more competitive in terms of where it's going to be to dry powder. It's going to be interesting the next couple of years because typically what's happened is that the best time to invest in these strategies has been post market volatility. So opposed to GFC, you know, eight, nine, 10, 11 ventures, 12 ventures were very good ventures. We've had some fantastic companies that we have in our portfolio. We've made great returns on them and talk to managers and they say, look, you're not going to buy anything now.
Right now, in the aftermath of. And while there's still uncertainty, if any one company is forced to sell out and distress, it was probably in distress prior to COVID. But what's really going to be an interesting period, is the next six to the second half this year and the first half next year where companies who have sort of managed to slog through like, you know, might find that, you know what, they do need to find a solution, whether it's to sell themselves or you had to find a recap solution or some sort of very risky financing.
So I think there's going to be some really interesting opportunity the next few years, especially with listed market comps coming down, values coming down. So they might be more opportune for public to privates as well. We're actually seeing what you're actually in Australia or some some see a few more public private opportunities pop up like, you know, companies are now on the radar screen of various private equity funds.
Thank you very much, James. And we've come to the end of the live questions so i'll hand back to Mark to wrap up and final words.
Excellent. Thank you very much, James, and mate, perhaps I could pass it over to you just for any sort of final words, closing remarks before I thank everyone for this morning.
Thanks, Mark, look. Yeah. The private capital asset class is a great way. We think it's a fantastic way to access the sort of small and mid-cap sectors of the market. They're the fastest growing parts there. You're getting exposure opportunities that might never be listed and you might not be able to find the listed market, especially in some of the software sectors, because, you know, the specialists of I.T. software, there's a lot of specialized software businesses.
You want that that'll be with special needs. Very profitable, fast growing. But eventually it might end up being sold to a larger strategic. So it might never, ever be listed. In other ways or other listed unlisted companies that w might never have been in private equity hands all listed. Hence, we saw an opportunity last week for a co-investment where it was a company in the US with 100 million in earnings. It's been found it's still founder owned up to 20 years and still growing.
And it's like, you know, never been touched by private equity is a fantastic opportunity for private equity or private capital investor to go in there and sort of, you know, try and turbo charge a bit more growth and get out of it as well. So we look at and say this is a great way with, you know, to access diversified parts of the economy, potentially faster, growing with a higher return ability.
Excellent. Thank you, James, and thank you for the wind up. The, ladies and gentlemen, I'd like to take the opportunity to thank you for listening today. We're pretty keen to make sure that we keep, as I say, our books very open and transparent for you to have a look at what we're up to and how we're investing money. I'd absolutely encourage you to dial into our next two webcasts. We've got another two coming up, one on alternative strategies and the final one on our equity holdings, including index.
We also have a dedicated Web page which will come up on the slide shortly. You and your clients can access this for particular information around the COVID crisis. What I'd also like, is to give you an expectation that we will send out a copy of today's recording so you'll see that arrive pretty shortly. We'll also send out registration link so that you can indeed register for the next two webcasts. And also, there'll be a survey for you to do and claim your CPD points.
So thank you, listeners. Thank you, James. Thank you, Will. Have a great rest of the day.
My name's Mark Stubbings, and I've got the pleasure to be your host again today, and welcome along to episode two in our Asset Deep Dive Webcast series. If by chance you missed our last broadcast, which was approximately a week and a half ago on the property asset class, there's a link on our website. Or alternatively, contact our business development team and we'd be happy to get a recording to you. This webcast will, and indeed the whole series is, very much designed for financial advisers, dealer groups and obviously other participants in the industry. And the whole idea behind the deep dive series is to give an insight update into the Sunsuper Asset classes. We want to talk about the objectives, the construction, the holdings and also the performance. We're also very, very committed to being open and transparent. We think that's particularly important for you and your clients during these very difficult times. After this one, we still have three webcasts to go over the intervening five to six weeks and we'll be concentrating on private capital, alternative strategies and also our equity holdings, including the index options. But today, as I mentioned, we're looking at infrastructure and to give you a little bit of an idea of today's agenda. I'm going to be joined very shortly by Andrew Robinson, who is our portfolio manager for infrastructure. Andrew's going to start off with a short presentation, which will give a good grounding for the for the asset class. And then we're going to turn to our questions. And we have obviously a live webcast today. And so we're literally welcome your live questions. And we already have some already that we've curated. If you want to submit a question, please have a look at the speech bubble on the bottom right hand side of your screen. We'll try our best to get through those questions. But if not, you're more than welcome to revert to our business development team. We can follow those up and we are very fortunate as well, we've got Will Burke here today and Will will be helping create the questions so that we can obviously present them to Andrew.
I am required, obviously, to go through the disclaimer and please be aware that obviously for legal purposes, what we share today is general information, and it doesn't obviously take into account any person's personal situation or goals.
So let me introduce our speaker, Andrew Robinson, who I mentioned is our portfolio manager for infrastructure. Andrew joined Sunsuper in 2011 and he's been in his current role since 2016. His responsibilities are pretty broad, but they cover portfolio construction, investment research and selection, ongoing reviews, reporting of funds and obviously direct and co-investment opportunities in Australia and globally.
Andrew's had 20 years in the industry and of that, 20 years, eight years was spent at Deloitte in corporate finance area. And Andrew was heavily involved with merger acquisitions, valuations for both public and private companies in Australia, the UK and Switzerland. Andrew has a business and Bachelor business. Sorry, a bachelor in business qualification, finance and accounting. And he's also a member of the Institute of Chartered Accountants Australia and New Zealand. So without any further ado, I'll now pass over to Andrew.
Andrew Robinson. Many thanks for that introduction there, Mark, I appreciate the opportunity to talk today. As at 31 March Sunsuper had just over $5billion invested into infrastructure. Across that 4 main diversified options, the allocation ranges between five and 1/2 and eight and 1/2 percent. And our balanced option has a seven 1/2 percent allocation. As always, the interesting question about what actually use infrastructure and to be honest in our strategy documents, we don't say exactly what it is. It's not defined specifically, but instead we have a set of characteristics that we look for and got them listed here. The long duration, large initial capital outlays, monopolistic qualities, stable income, GDP or inflation linkages and long term contracts. And for us, infrastructure doesn't have to have all of those characteristics. But the more that it has, the more likely that we do consider its infrastructure. We list some examples on the slides These are common infrastructure assets.
But I would say that the definition of infrastructure is getting broader over time. And this is something you actually need to be careful of. What some people would call infrastructure is not what we would call infrastructure. Some people take much more risk than us. Early stage development, lack of yield and to us that's a more private equity, so different characteristics. than in the low risk approach we take. We move on to the next slide and we really go on to talk about how we invest in infrastructure. So we've identified what we consider to be the best managers, there are in the market, and we invest with them about 75 percent direct and 25 percent in funds. Investments can take the form of either listed equities, unlisted equities or debt. We consider the listed equities and debt to be more of an opportunistic and we really focus on that unlisted side of things. I really want emphasize that we are low risk. We do focus on the core and core plus infrastructure. We're really looking for yield and also, if conservative with average, only about 35. The average gearing across our portfolio is only about 35 percent. Governance is a critical consideration for us. We are always looking for broad representation that we can influence the direction of the company and drive additional value for our members. And last point there is that we believe in active management for the portfolio. We retain full discretion over all the direct investments we make. You don't just rely on managers to do that for us.
Over the long term, we think of infrastructure as being half defensive and half, growth. So we think about it as having fixed-Income like characteristics. We should get a bit of upside for equities and be able to capture the liquidity premium. And that's really our strategic benchmark. Half equities and half bonds, because we like risk, it should yield that 4-5 percent and over the long term expecting then eight and a half percent return for infrastructure. In short term, I would expect we could do a little bit better than that however.
We move on to the next slide, we go into a little bit about the portfolio diversification. You can see here, we have got a diversified mix of assets in the portfolio. It is a combination of those core class assets which tend to be more GDP correlated like airports and ports and core assets, which are more the regulated utilities, lower risk type assets. And we have assets in between. Probably the better slide to show you is the next one, which really shows the diversification of the portfolio.
And this is the first time we have presented this slide, hopefully it adds value.
What is really showing geographically how diversified we are, we have about just over 50 assets in the portfolio, the direct investments are the dots in Orange and they tend to be a little bit larger. The blue the blue dots are the assets which we hold indirectly through the funds that we invest in. And also, I mentioned we are lower risk, so we haven't really focused on my low, lower risk. OECD, Australia makes up about 45 percent the portfolio, Europe 40 percent and North America fifteen percent. The most exotic direct holding w have in the in the portfolio is an asset in the Czech Republic. Czech Republic might cause concerns. It is a core regulated asset and has actually been one of our best performers since we held that asset. You would also notice that we do lack the emerging markets in our portfolio. There's two reasons for that. First one is fees; it tends to be more expensive to go into those markets.
We are really trying to keep the fees as low as possible and give more returns to our members. Secondly, it's often high risk going into these markets. You are taking on more risks. And for us, we're just not quite sure whether the risk return trade-off is there. We go on to the next slide, this is the last one of the formal presentation here, and we'll pause on this one for a minute. We'll explain it. That top line there, this is a return of Sunsuper's Infrastructure portfolio of the last five years.
I mentioned earlier that we do think of infrastructure being defensive in growth. And we we effectively take our money from equities and bonds. So that bottom line is the public market turn mixed 50/50 equities & bonds. You see over the last five years, we've had significant outperformance against that bottom line. So being able to invest in these alternative asset classes, we have been able to capture that illiquidity premium and drive additional value for our members. Now, the line in the middle is also quite interesting.
There is a listed infrastructure index out there and that is a return of listed infrastructure index over the last five years. You can see that again, we significantly outperform that, so we have been able to capture that illiquidity premium. But not only that, we've been able to do it at lower volatility as well. So why do we have low volatility in unlisted infrastructure? It really is that the market does tend to overreact and a lot of stocks move with market sentiment taking a longer term approach, periodic valuations, we don't have that volatility.
So if you look in the last few months of, or the first few months of this year, you can see the massive draw there was in the listed infrastructure index there, and it rebounded about half of that shortly thereafter. Looking at our returns, there is a draw, but it's more stable. The drop isn't as big. But when you look at what happened at the end of it, through 2019, at least, the infrastructure index had a capital return, just over 20 percent.
Our index had a more of a comparable return of only nine percent. So we don't have these massive spikes on the upside at the same time we don't have the massive drops either. And that's really why we like investing in unlisted infrastructure. It can deliver you both higher returns and also do with the lower risk in the form of low volatility. There is one other thing which I wasn't able to put up here because of licensing reasons.
There is an unlisted infrastructure index as well. This is contains the IFM funds UTA, TIF, a number of other funds. It is common for our peers to invest in. Over the last five years of actually out performed that by about two point eight percent per annum, so compounded just under 15 percent over the last five years we've out performed our peers, which is something we are we're very proud of. I'll probably pause right Mark, and just hand back over to you.
Andrew, and we already have some questions that have come in prior to this, and then we'll actually deal with some live ones as well. But some of the questions we've had already, Andrew, and the first one's a bit of a double barrelled question so I can hit you with that. So, Andrew, what is the due diligence process for buying an infrastructure asset looked like? And second part is what do we look for?
That's why we've got the slide of Long Beach container terminals we can put up and this is our most recent investment, the largest port in the US is Los Angeles and Long Beach has multiple terminals. And we have just bought an interest in one of of these terminals. But I'll just take a quick step back first and talk about our process. As I talked about, we have our managers we work with in partnership with and we see that 70 to 80 opportunities a year from those managers. Of these opportunities, we do desktop work on maybe 10 to 12 that's a week or two's worth of work. We will do full due diligence on 4-5. And which I'll talk about that process shortly. And if we're lucky, we'll invest into one or two assets a year and that's it. So, yes, it is a lot of work to get to one or two assets, but we are deploying two to six hundred million dollars per investment. So we do need do want to work and be very careful with our members money. The what I say is that we are very thorough with our DD process. We don't just rely on our managers to do the investments for us. We actually we have three sets of eyes looking at every opportunity. And managers do their due diligence. We also work with Jana closely who do due diligence on an opportunity and we need to do to do our own as well. And for us to actually put anything up to our investment committee, we need all three of those parties to give a positive recommendation. So what's the process look like?
We as a team within Sunsuper, we look at every single DD report. We spend weeks looking at these and I'll normally end up with a pile of about six inches of paper on my desk that I need to get through. We will pour over financial models and sensitise them, we will negotiate legal documents, we'll engage with financial advisers. So it is a very hands on process that we are doing the work ourselves. And that process can take up to six months. Looking at Long Beach container terminals here ;this was probably about two to three month process, this one. We started work in, say late September, working from Australia, going through all that material. By early December, we'd done most of our work. We thought it was prudent to go and meet the management team as well. So myself. Naomi in our team, and Brian Parcker, our Chief Economist, all went over to the US to spend time with the management. It was great having Brian there, he could interrogate them on the economic assumptions of forecast and trade volumes. You've also got to wonder around the site here, these cranes here are massive. They're actually about 30 stories high. And we went to the top of those as well, being afraid heights myself, it was a challenge, but I managed to get through it, thank God. So it is a very thorough process that we do spend. And it was great to go and meet with the management and get additional comfort that they are aligned, committed, and the business plan working is going to be deliverable.
You ask about what we look for. It is not just about the returns of an asset that we that we look at. I spend massive amounts my time looking at the risk and what can actually go wrong. It is very hard to make a bit of extra upside on any asset. It is very easy to lose money. So looking at those downside, protections are critical to us. So when we were doing DD on this opportunity COVID-19 had started, but it hadn't really taken off.
Our base case was that there was going to be a recession in the first two years after we bought this asset. So we thought to be more conservative, there were some instruments to two year recession. And look, I'm very glad to take that position as a consequence of taking that conservative position. We're actually outperforming our base despite the headwinds being face to global trade as a consequence of COVID-19.
That's an excellent story. Thanks, Andrew. Now the next question's very high profile one, because obviously assets very high profile, or the group. Given our exposure to airport, what has been the impact from COVID-19, and double barrelled question again, and what does the road to recovery look like? Andrew.
Let's look at our slide of Brisbane Airport, we can put up there. You'll notice a brand new runway on the right, which is due to be opened in July. But you'll also notice a bunch of planes parked down in the front. What I'd say is that we have been long term investors into airports since 1997, the airports, so we understand space extremely well. There's no question about it. Airports are facing massive hits at the moment. Passenger numbers are negligible., revenues are down a lot, but fortunately, a bit isn't down as much. There are costs we can minimize and take out, and the other thing you have to appreciate about airports like Brisbane Airport, for example, is it is a diversified revenue stream.
Brisbane Airport is actually two thousand seven hundred hectares of land. You don't really appreciate how big a it is, yes you've got the main terminal and the runways, but there's a massive land bank and the management team's done on a very good job at building out that land bank. There's a lot of industrial property, there's a shopping centre, Duty free outlet, an Auto mall being built. There is consideration of golf driving range .That really diversifies the revenue base and gives you some protections for a shock, which is really a one in 100 year shock, which is the occurring today. With all these headwinds, rest assured that we have factored into the valuations already, we actually did out of cycle valuations for all of our assets as at March. Number of assets, including our airports we need additional valuations at April, and we even did another valuation in May. So we have updated these headwinds into the valuations and as the situation evolves, we will adjust the forecast accordingly. But historically, airports have rebounded very well from these types of shocks, from SARS, to the Asset collapse, to the GFC within two years of people being back to their pre crisis levels.
How do we see the road to recovery today? We're actually seeing, we're expecting bit more of a protracted recovery for the airports today. Yes, we think demand to travel for business and leisure will remain. But we're expecting more of a four to five year recovery to get back to 2019 levels. We still really do see airports to be as attractive investment opportunity. When we look at them, they still do retain those very strong infrastructure characteristics. They are Monopoly's is really no alternative if you want to go overseas.
There's large capital outlays which make a barrier to entry, there's GDP and inflation linkages which will benefit from any recovery going forward. So where we sit now, we expect long term our airports will still continue to deliver us single digit to low double digit returns well into the future.
Excellent. Thanks, Andrew. And last question and again, double barrelled is Sunsuper looking to further invest in infrastructure. And generally, how does the future look for this asset class Andrew?
Look, as a growing superannuation fund, we are always looking to buy more and more investments. We have grown this infrastructure portfolio from 700 million nine years ago to five billion dollars today. Over the next five to six years we need to grow it to nine billion dollars. So, yes, always looking at opportunities. What have we been looking at lately? We have been looking at gas pipelines in Portugal. There's actually some here for sale in Australia as well, which we've been considering. There are renewables in the US we're spending a little bit of time on. We've been looking at telco towers in Australia, some mobile phone towers, data centres has been another focus area and we're doing a bit of a deep dive on that sector at the moment. So there are a broad range of opportunities for us. Where do we see the direction in Infrastructure? With infrastructure, in my opinion, has moved from an alternative to a mainstream asset class. But there is a huge wall of capital still trying to deploy, deploy into this space.
So as more capital comes in, it will continue to put the prices up and returns down even further. We think with the way that cash rates are, bond rates are low, they are unlikely to be low for a long time. We just don't see that that changing anytime soon. What I will say is that for us, what is important, and that is to be patient, to remain disciplined and don't overpay for assets. That's critical. If it takes a while for us to deploy more capital into another asset, that's fine. I prefer to wait a bit of time and buy the right asset than just get capital employed and potentially lose our members money.
Excellent. Thank you, Andrew. And now what we're going to do is cross over to Will for some submitted and live questions. So Will, what have you got first up for us?
Thank you, Mark. And there's a number of questions that come in regarding valuations. So we might spend a little bit of time on that, if that's okay, Andrew. So first question is, valuations are opaque, who values your infrastructure portfolio and on what basis are they valued?
Look, really happy to go into this one, you do read in the press about valuations of unlisted assets being opaque. Clearly, the industry hasn't done a good job explaining the process. Hopefully I can clarify that today. What I would start by saying is it is really an independent process. We don't seek to influence the valuations. Who do we work with to do valuations? Most of the time it's the big 4 accounting firms. They always have a corporate finance area within that they have a specialist valuation team. Who's only job really is to value businesses for M&A or for reporting purposes or for Superannuation funds. Highly knowledgeable people constantly looking at transactions and they know what these assets are trading for. We appoint them for a typically a three year term. Why three years? Because we want to rotate the value to get a fresh set of eyes on things, make sure there is no retrenchment in valuation and valuations are done every three to six months, they're periodic valuations. The process of actually doing evaluation takes between five and six weeks. Normally, it normally starts with the management team of the asset. They come up with their own long term business plan. Typically a 10 or 20 year model, some of them are even longer. And it's pretty common for the management team of our assets to get independent advice when the building that forecasts.
So Tourism Futures International is a common adviser used by all or by many of the airports to help forecast where passenger numbers are going to go going forward. They build us into their model, so they independently produce their own long term business plan, which they work towards. They give that to the valuers. As I said the valuers are experts. They look at these things all the time and they review those forecasts and they account that they might sensitize those models.
I might adjust for assumptions that they think are too aggressive or too conservative. And then they will come up with a discount rate to value those assets. Once they've valued them on discounted cash flow, they always use a secondary method to value the assets. Typically, an earnings multiple is the common way to do that. So how do they know what's an appropriate discount rate? How do they know what multiple to use? They simply look to those markets and then look to the transactions that are occurring.
As I said, these people really are entrenched into doing transactions. They know what these assets trade at all the time. So they use that public market data to assist them pricing our unlisted assets. So really, the value of our unlisted asset should mirror the listed assets or what's trading in the market and the transactions very closely. So really, to summarise that, I'll say what we've got a situation where we have independent business plans that come from the company themselves they go to the independent valuers who make adjustments to the cash flow is based on their experience, if they say necessary. They look to the public markets and transactions to come up with evaluations and make sure that they are consistent and they provide those to us. So hopefully that provides a little bit more clarity and always happy to take additional questions on that, follow up questions, because it is something like I said, I'm not sure the industry has done a great job of explaining it.
Thanks, Andrew, and just to dig into Valuation's a little bit more, if that's okay, because there are a few more questions that come in. Can you just touch on member equity for people in between valuations, member equity for switching investment options or entering or leaving the fund and whether that opens up arbitrage opportunities?
And look, with the periodic valuations, it is something we are very conscious of. If I look at the current COVID-19 situation where Equity markets were dropping a lot. There was a lot of concern within our team to make sure that we are reflecting fair value. So we engaged valuers to do Out of cycle valuations I did touch on what we've got; every asset valued as at 31 March. We also got many of them revalued at April, the ones which are more GDP correlated like our airports than we had even some done as at May. So, look, we are trying to and we are ensuring our valuations reflect what is occurring in public markets. We also typically in situations which are not volatile out there at the moment, we're not getting the valuations done. We do roll forward the value of our assets on a monthly basis as well. So we know what the discount rates are in our portfolios. We do roll them forward every single month to ensure that those valuations do track, what we expect the valuation to be at the next independent valuation. So it does really minimise any opportunity for arbitrage to be had.
And just to change tact a little bit, just there's a question from Steve about our registries. What are the registries? As he's observed, there's a big percentage invested in registries.
This is a really interesting one. We own interest in the land titles, registries in both South Australia and Western Australia. So every time someone takes out a mortgage or buys a property or needs to find a title to a property, they have to go to the register. And that's it's a record of all property ownerships in the state. So it is an essential service and it's got monopoly characteristics that every time you trade property, you have to look to this register for the title. Now, the, what the government did they effectively privatised those registries. So the government sets fees that are charged for people to look at the registry. We maintain that registry effective to government. So we take a very small fee each time someone needs to access the registry and as I said it is an essential service. So while it's not a physical monopoly, it is a legal monopoly that no one can replicate these registries and it provides an essential service to the community to the community for any trade in property.
And there is a few more questions, but we are starting to run out of time, so we'll perhaps get back to those questions individually after today. And I'll hand back to you, Mark.
Thanks, Will. And we are very, very keen to make sure we do answer the questions. So we'll take the opportunity to either answer from through the BDM team by follow up. That would be good. So, Andrew, maybe just in closing out the questions and answer, piece. Any final words on infrastructure from the from the managers perspective?
I want to probably wrap out by saying is that Sunsuper has been investing into Infrastructure for 23 years now, we're actually one of the first direct investors into this space. There's probably very few superannuation funds in the market who have much experience as us investing in infrastructure. In that time period, we've built up a portfolio of core and core plus infrastructure assets, and that's not a portfolio you can replicate today. Many of these assets are quite tightly held, but when they do trade, they typically go to the existing investors. We've also built relationships that, as I said, with who we consider to be the best managers in the market and we work closely in partnership with them. And we've also built up appropriate skills in-house to allow us to identify risk and mitigate risk and price risk, because that's effectively what we are doing as investors, we're pricing risk. And what this all means is that we believe our portfolio will deliver both those defensive characteristics of yield going forward, but also that upside from capital growth for many years into the future.
Thanks Andrew. The also good opportunity for us to wrap up the webcast now time is knocking on the door. Andrew, appreciate the time that you've spent with us today. And we look forward to any other further questions and answers that we will direct towards you. Big thank you to our listeners, we appreciate you joining in and obviously sharing questions with us and being interested. We're very keen to make sure we keep you up to date with what's happening at Sunsuper, both from an outlook, a service, but also very importantly, as I mentioned a wee bit earlier, just in terms of being open and transparent about what's happening in our business. You and your clients are most welcome to look at our dedicated web page, you'll see the link on the screen as it is there. And there's a lot of material that would certainly encourage you to look at. Please don't miss the rest of our deep dive series. We've got some exciting segments still to go. And again, we'll go back to looking at around the objectives, construction, holdings and also the performance of our various asset classes. You can expect to out of today, an email that will have a copy of this recording. So you're most welcome to view, share as you wish. There'll also be a registration link for the other webcasts, and there'll also be a set of instructions for claiming CPD points as well.
So thank you again, listeners. We appreciate your time today. Goodbye now.
Welcome, everyone. And good morning to you all and thanks for joining us for our Sunsuper Webcast. Let me introduce myself. My name's Mark Stubbings. I've got the pleasure of being your host this morning. And this first webcast, we're actually going to look at a particular asset class, but it's part of a deeper a much broader series where we actually deep dive down into our asset classes. This webcast is designed for financial advisers, dealer groups and industry participants and is obviously tailored accordingly.
What are we trying to achieve? We're trying to achieve with this webcast series, an insight and an update into the various asset classes we have. We're looking to talk about the objectives, the constructions, the holdings in those various asset classes and obviously the performance. We are also trying to be very open and transparent in these very, very difficult times. Obviously, we are in unique times, so to play things with a straight bat is very important for advisers and also for their clients.
We're actually going to look across a number of asset classes over the intervening weeks. We'll look at infrastructure, private capital, alternative strategies. But we'll also look at our equity holdings, which obviously include our index options today. However, we're focusing on our property asset class. Let me give you a little bit of an idea of the agenda we're going to welcome very shortly head of private markets Mike Weaver, who will actually talk to us today. And first up, he's going to give a short presentation on the property asset class.
We've designed this so that although he frames up the conversation, the desire is to answer your questions, the audience, his questions. We've received number up and to up to this webcast and we're actually going to answer those. But we will be taking live questions during the broadcast. And we really hope that you participate and join in. Just a bit of housekeeping to help you with that. To submit questions, you click on. Click on this speech bubble bottom right of your screen.
I've got the pleasure to be with Wilberg today and Will sitting to my right, and he's going to create the questions. Just be aware there is a few second time delay between submitting and receiving. We'll try our best to answer as many as possible. If we can't answer them, we'd encourage you to touch base with the business development team and willing to endeavor to do that. We've got a legal disclaimer that I need to read through now. Obviously, the information presented today is general and doesn't take into account a person's personal financial situation and goals.
Let me now introduce our speaker today, Michael Weaver. Michael is head of private markets. He leads a team managing property, infrastructure and private capital. He's concerned with portfolio construction, investment research selection, ongoing reviews and reporting on the property portfolio, which is obviously part of his brief, has six billion dollars worth of investment in funds and direct assets in Australia and offshore. Little bit of Michael's pedigree. He's had 14 years at some super nine years prior to that with Mercer dealing with large corporate clients.
He's got a bachelor of business, a graduate student management and also a masters of applied finance and investment. So now I'll pass over to Michael Weaver. Michael. Thank you, Mark. And so on, slide five in, we have the asset class a little bit about the portfolio. So as I mentioned, as Mark mentioned, just out of six billion dollars is invested in the property asset class. And that makes up around eight and a half to ten and a half percent of the different diversified options that most of our members are invested in.
And we also have a property auction, which makes up a big portion of that as well. And what do we do with the unlisted property that we invest in early after sort of pure play property? What do I mean by that? I mean, one of the tangible assets, real buildings, shopping centers, office towers, industrial logistics sheds, other investments. We have such a self-storage residential for rent, even holiday parks and data centers. So a wide variety of assets.
We're after a real income that they generate. And so we don't do a lot of development. For example, we're not really that focused on capital gain. We expect capital gain over time. There is growth from these is portfolio. There's more around how much income can we have, the stability of those leases.
Moving on to the next slide. How do we go and invest in this asset class? We invest by partnering with great managers and that's both here and offshore. It is a diversified portfolio. I've got some numbers on that in a minute. Really, we look to partner with the best operators. We don't try and do everything ourselves. We're selecting what sort of assets that we want. He manages the best place to look after those those assets. And we also invest in both equity and into debt investments.
Debt investment make up about 15 percent of the portfolio. And we think there's an attractive risk return basis in some certain debt investments that we make equities around 85 percent of the portfolio.
But we have relatively low gearing or compared to some people who invest in large commercial property. It ends up being around 20 percent on average across that portfolio. So that that's a prudent level of gearing, despite how attractive low rates are in today's market. So what are we trying to achieve? We're trying to achieve long term outperformance of a mix of equities and bonds. That's where we take the money from. So we're after diversification away from equities and bonds.
So you have some growth. You'd have some income coming through and generate a lot higher than what about bonds or cash will offer you today. And we expect that premium over time generally called an illiquidity premium. We take money out of more listed liquid markets invested in unlisted than expected premium.
Then we also compare ourselves. You look at the bottom right of that slide six. They target outperformance. They get some unlisted peers. So different asset classes in both the U.S. and Europe have different benchmarks. So we can compare ourselves to two to make sure that we're getting great returns for our members. Under the next slide, the graph shows the chart shows a nice mix of the portfolio. So retail is around, it says. Twenty two percent of the portfolio of a large man in office, but also for rent residential.
So that's multifamily, some aged care assets, particularly in the US.
Quite a lot of multifamily over there, which is a bit like a big Meriton apartment, but it's only run by the one operator and it's only for rent. I don't sell off any of those underlying underlying units.
So it's quite a big asset class in the US. We've tried. Different people have tried to make it stop here in Australia and I think that'll occur over time. But it's still in a pretty, pretty early stage compared to the US where it's been established asset classes over 30 years. Industrial logistics assets and self-storage. And in other, we have our holiday parks and data centres, as well as some other assets, such as medical office. The next slide shows where we invest.
So a very large portion in Australia. But that 10 years ago we diversified offshore unnecessarily to get higher returns. Some people invest offshore for high returns. We looked at it as a way of reducing risk. We're a global investor. We have lots of assets offshore and the equity table oil on portfolio. Australia is a narrow market for. So you wouldn't be able to access things like the multi-family essential in some of the other asset classes in Australia or sectors abroad.
So we think going offshore, it's actually has been a creative two returns.
But that's not the primary reason why we invested offshore just under 10 percent in Europe and then Asia. While we've done a lot of research, there is really just the early stage. Only one percent expect that to increase over time. But Asia is generally more volatile market. Shorter term places doesn't give us the stability of income. So what we have there is industrial and logistics assets and we expect those to increase in them over time. Under the next slide, one of the questions we get asked a lot is why do you invest in unlisted property as opposed to listed property?
And how does unlisted generally perform compared to the listed property? And it's an ongoing discussion that we have with a lot of people. And really, it's basically that first reason why we invest in property to give that diversification away from equities and to get that pure buy property. It's a lot harder in the listed market. So there's some great listed companies, great management teams, great assets underneath. But sometimes it's really hard to get us to know exactly what you're going to earn over time, because they might have large development pipelines.
They might make some capital transactions, such as buying a competitor or using gearing to invest offshore. Just not exactly sure what you aren't necessarily going to get. Some of them had large funds management businesses that could be good businesses, but when there's a downturn that they get impacted more than that, if it was just pure property. And so that's one main reason.
The other reason is really demonstrated on this chart that they can be the listed market will value some of these companies more or less. And what the underlying asset value actually is because of the market sentiment and how equity markets are attractive in general. So you can see on the chart it can be up to 30 percent above 30 percent below what the underlying values actually are. And the underlying values of that, most of those businesses attract exactly the same way as what we have in the unlisted market.
The external valuation firms independently done on a regular basis, and that the market sentiment can drive at a bubble. So it's really those two main factors that made it hard for us to to allocate to to the listed market.
Mark was their mark, and if there's questions, we can start those now. Thanks, Michael. And that was a good presentation, very good grounding. Maybe I can start off with some questions that we've received up to now. So we've obviously had a bit of a chance to prepare some answers for. And then we'll dip into some of the live questions. So first up, COGAT 19. The whole situation just in the context of that. What has been the impact on unlisted property earnings and also valuations?
Michael? Yes. Thanks, Mark. Yes. As you said, did say yes. Obviously, a very hot topic right now and there's been a lot of press around what's going to be the impact on shopping centers, office buildings and things like that. So, you know, we've spent a lot of the last few months really digging deep into what those impacts are likely to be. It is quite sector specific. So, you know, starting with retail property, that's the obvious one, that when not a lot of those a lot of the retail shops decided to close because not many or barely anyone was coming to visit.
That has a big impact on earnings. The government has come out with a tenancy code of conduct. So most of the businesses, both landlords and tenants, are working through that to determine what's a fair sort of balance of, you know, the impact of Covid. But there's no doubt that that's the short term impact to earnings and could have implications over the medium to longer term as well, depending on how Australia and other countries that we invest in react and rebound from the impacts of Covid and office buildings are a little different.
It's very asset specific and tenant specific, similar to industrial and logistics parks.
The reason for that is you can have some long term tenants, stable businesses.
That's going to be very different to if you are having a development on spec and trying to, you know, trying to rent that out, or if you've just got an upcoming vacancy, you might have less certainty of being able to roll that over law or get the value that you thought this sort of income stream you thought you were going to get. And one of the the next slide that we have is a building that we were a couple of buildings that we own a part of alongside Mirvac and AMP that's called South Everleigh in Sydney, just the southern part of Sydney. What that is very there are two very large buildings in this small third building, and CBA is the major tenant there. It's a long term lease. Something like that. We fully expect to be less impacted on a valuation basis than something that is a very tall shopping centre or if you're building something on spec. So that's that's an interesting example. And in terms of the actual impact, it is to two valuations across the portfolio.
The average write down was about seven percent. We undertook a deep dive into each asset and sector across the portfolio during March. Once it was obvious instead that there would be impacts. And we think that across the portfolio the numbers are around seven percent down. Shopping centres were 12 and a half percent on average, and some office and industrial and other assets were less impacted. So things like multi-family, a small impact. We do expect to have some. So far there has been some downturn in earnings and in the short term, you expect that to be bouncing back as as Covid is is recovered or the rebound from Covid occurs over the next sort of six or 12 months in most areas.
And another investment we have got on the next slide is called Discovery Parks. They own over 60 parks around the country and also have marketing arrangement for another 200 parks. So full network. And this one's out of Rottnest Island in Western Australia. Beautiful park that I encourage you to go and visit sometime if you're ever out out in W.A. and that they had to shut a lot of their parks because of state government legislation might make sense to to to close those that had to be done except essential work is, et cetera.
But then they also had that's in the holiday park area. But then they also had mining parks and worked for state where they weren't. They weren't needing to close. Those are able to keep going. So definitely a short term impact on earnings. But then over the medium and longer term, we believe that there'll be a slower rebound in international travel, which should encourage more people to have a holiday at home. So jumping in the car and going for a holiday, it's more likely to occur probably over the next six or 12 months.
And other thing, price. And what are you saying? Bookings occur? I know that we're keen to. That's been fine being at home for a couple of months. But, yeah, the families came to go and have a holiday. So we're looking mining for October. So hopefully a lot of you out out there will also be able to find a nice park to go and have a nice family holiday. And maybe a pause there. I can come covered in more detail if you like, Mark.
Thanks, Michael. I got to say that. Picture Rottnest Island looks particularly attractive, but I might be second booking after you, my friend. Another question that some super classifies unlisted property as 50 percent growth, 50 percent defensive.
Does this still hold true? As a rule, given the impact to earnings that you've touched on? You look simple answers. We think it does. Look, that's a long term expectation over the medium to long term, you expect to have 50 percent growth, 50 percent defensive characteristics from the asset class. That's one of the reasons why we're funding it from equities and from and from bonds. And there's definitely a hit to earnings right now. But you do expect when there's a downturn in equities, you do expect some impact on the property asset class not to be immune.
Doesn't really make sense when you're looking for the long term asset. So and that that that short term impact on earnings will be, as I mentioned, quite sector specific as to how long that will occur for. And when we look through the cycle, we say, well, do we think that still holds true? This is a different cycle. Every cycles different people wouldn't have expected.
And when they expecting a downturn, you have a hit to earnings that don't really expect that half your retail shopping center is going to be closed.
So and as they open up and, you know, retailers work through how how that all how that will impact you will have more impact there than some of the other assets across the portfolio. It's going to be impacted anywhere near as much. And that's why you have a diversified portfolio so that you don't have all your eggs in one basket. No one can predict the future. We just have good estimates of what what's occurring in some of the assets of bill, good demographic trends behind them.
So the multi-family US, US is still expanding people. Yes. Some of the aged care assets that we that we have investments in holiday parks, even with tourism over time. So we think those demographic trends would be helpful. Excellent. Thank you, Michael. And Michael, we've talked about some say the adverse impacts of what's happening. But what are the opportunities in the market? Double barrel question, are transactions occurring?
Yeah, but look, realistically, most of the market is still dealing with the fallout. So it's been a huge shock. If you compare it back to the global financial crisis, it was there was a lot more leading up to that crisis where people were thinking, you know, could could something. How bad is it going to be? Whereas this was a far quicker an earlier shock. So people are dealing with their own businesses, their own households, families.
And then they're worrying about how they can how they can work out a different tenancy arrangements and issues like that.
And so there hasn't been a lot of transactions. A couple imposed, a couple of kids kept going. So some industrial and logistics processes. And we'd had a look at what the pricing was, pretty, pretty high. The whole market has been very high for those over the last couple of years. E-commerce has been very helpful. That's going to continue with retail being affected. Actually helpful for industrial logistics assets. And so some of those assets are going at similar, if not better, prices than what was happening prior to the crisis.
So there hasn't been enough time so far for sort of any real distress to come through the market. We think that might occur over the next six or twelve months. But we'll be dependent on how quickly markets rebound and economies and health systems in general rebound. So we'll be quite country specific, we expect. And thankfully, Australia's so far done very well at coping with the crisis.
Awesome. Thank you, Michael. And what do you think? Another double barreled question, so I'll hit you with both at once. What is the outlook from listed property? Has the future fundamentally changed? Look, I think so, starting with the first part. Look, the outlook as professional investors, we compare unlisted property to every other asset class we invest in. So we're taking money out of equities and bonds, but we don't. That's one decision.
But then we can invest in infrastructure assets or private equity or private debt. And there's a lot of different opportunities out there. So we look at unlisted property compared to those, and we believe that unlisted property will still remain attractive. Reasons are long term demographic trends are helpful for property. When you've got high quality assets in good locations, they will continue to be attractive for investors long term and be able to generate income streams. But it's also the relative attractiveness of equities and bonds.
The bond rate, the 10 year bond rate in Australia is still under one percent. Equities have rebounded from their lows, but there's still a bit of uncertainty around underlying earnings. So people are looking at those and saying, well, property still gives me good stability of income, much higher income than what I get from bonds or cash. And good opportunity for growth, maybe not huge growth, but at least good, attractive growth. So I think that's the property market in general.
Once you get into different assets within the property asset class I mentioned retail had been marked down more than the other asset classes and it was already under pressure beforehand. It'll be interesting to see how that sort of online trend and how quickly people come back to shopping centres and looking looking to invest. I know that there are different different views in the market on that as to what people are going to want to want to be doing. So, yeah, I think that's that's quite interesting.
Office working from home. Look, I spent a couple of months for us working from home. Most of the team is quite keen to come back to the office. Some are less so. I think there'll be more working from home and flexibility. But the death of the office has been talked about before, and I don't think this crisis will be that different. Obviously, the social distancing part of it, at least until there's a vaccine, will will make it a little bit more difficult in offices.
But the interconnectivity. Humans are social beings like relationships. It's it is easier dealing with people in a meeting room, reading the room than reading the zoom. So you do find that most people you talk to at least change come back to the office and have that interactivity? I think that's good. And then there's other assets that are less impacted or actually it's beneficial. So one on the next slide, we have data centers and investment in Switzerland, very long term investment, very long term tenant.
The major tenant is Microsoft is a large amount of tenants. Microsoft is the main one under long term contract and it's seeing increased demand for the data. So we invested in this over a year ago and something like that has good income, but also growth opportunities as it as it looks to looks to grow.
Thank you, Michael. So what I might do now, Michael, is pass over to Will, who's sitting off camera. And let's do some live questions from our audience today. So will you want to hit us with some of those plays?
Thanks, Mark. There's a number of questions coming through, so please do keep them coming. The first question for you, Michael, from Russell waiting is how how are your property investments held? Are they single property, direct ownership or multiple direct properties housed in an external trust or similar? And are they geared?
They could question Russell, and it was actually my notes, it's mentioned that earlier and one of the problems with live TV is if you get a, you get a phone call as your as this occurs so sorry about that. That wasn't someone that was made having a phone a friend answer. And the answer to your question is we invest directly in equity, but then also in debt. And so so that directly into assets, but then also directly into property funds that have fund investments and lots of different underlying properties as well. So we're agnostic about which the best path is. It that vary asset and an opportunity specific. The second part of your question around Gearing and across the equity part of the portfolio.
We have gearing at around 20 percent, sir. Rates are very attractive. We can get a lot more debt than that across the portfolio if we wished. But we think that's a prudent level of gearing for the sorts of opportunities that we're after. Thanks, Michael, and a question from Steve. You mentioned you do evaluations often. How often specifically is it monthly, yearly, etc.? Yes. So on a normal basis, the guidance assets, specifically the large assets generally done on a quarterly basis.
And we can do monthly updates and monthly updates, your income, etc. We valued everything in the portfolio during March. And then all any sizable asset and all the large funds that we invest in, they're all getting value on a monthly basis as the Covid crisis continues on. And, you know, more information is now on whether whether it's positive or negative. All of those come through. And and yet I consider it into the valuations.
Thank you, Michael. And a question here from Steve, It's a two part question. The first part is. Is it possible to get returns updated daily? And if you like, we can we can take that one off line. But the second part is right now, the end of April figures look dire. But I suspect an updated report would be quite different. So perhaps if you can comment on the performance side of things in terms of to the end of April and how far things are since since then.
Yes. So not exactly sure what specifically you're referring to, Steve, but I think to the end of April, if you looking at the property option that we have, we have two different options on the platform. One is the property option, which has around 75 percent of what I've been talking about today at the unlisted assets and 25 percent of global rates and therefore liquidity. And then we also have an irate option, which is Australian rates only an index option that that's 100 percent Australian rates.
And both options are being negatively impacted by markets higher. It's more so. And then there was a rebound through April as markets recovered from their March lows. And we don't look, it's still relatively early to tell where a thing where markets go from here. Listed market, as I showed on the previous on one of the slides, quite volatile. It's really market sentiment that it will be driving those values right now because people are basically trying to predict where they think values will behave in future.
Our external valuation process, we think. So what we did in March and when we took those valuations down, most of those are when the formal valuations, external valuations have been updated for the end of April. They've all come in there or thereabouts where we took those marks in March.
So we think that there's a stabilisation there.
But if Australia continues to open up schools, work and restaurants, etc, then you would expect that there'd be more of that recovery back to where we were. There's still a huge amount of people on JobKeeper. The economic uncertainty is is real at this point. So I think that's still a good couple of months to wait until we see how Australia recovers from from the downturn and JobKeeper, etc.
Thanks, Michael. And we are running pretty short on time. So perhaps we've got a couple, Just a quick answer here. Another question from Russell, Wadey. If you revalue an asset at, say, negative 10 percent, does the gearing at, say, 20 percent, mean the overall downward impact is negative 12 percent. I would have to double check them. Essentially, yes, so yeah, if you're marking an asset down by by 10 percent, yet the gearing will will mean that it that it ends up being worse. I think the math be a little bit different. But yes, essentially it's a larger impact the more gearing you have, which is when I mentioned that prudent level of gearing, 20 percent gearing helps you a lot. When markets are good and it hurts you when market supports.
Thank you, Michael. And look very conscious of time. Appreciate all the questions coming in. And as I mentioned before, we're happy to take those off line and actually deal with the questions direct. So please, with those questions or any others. The BDM team is most happy to help reach out to us. Let me take the opportunity to thank you, Michael, and obviously thank the listeners. As I say, we're very keen to be open and transparent and very, very difficult times to give you confidence in the client's confidence.
There's material, but I'll put up on the slide. It's a reference point on some super website for you and your clients that you're most welcome to. Look at, look at. Please don't miss the rest of the webcast series. We're looking to involve a number of other investment managers and our investment managers will talk about, as we have done today, objectives, the constructions, the holdings and the performance of various asset classes. Keep an eye out.
E-mail will come out later either today or tomorrow. Today's recording. And we'll also have a registration link for the series. So I'll definitely invite you to join us for our other webcast. So thank you, Michael. Thank you, listeners. Appreciate your time and trouble today. Thank you.
Hello, and thanks for joining us on this very special episode of The New School of Super. This is a webinar, especially for our registered advisers, because we know you're very interested in how Sunsuper has been holding up through these extraordinary times. We know that you care very much that the Super fund you recommend to your clients is a safe pair of hands. Now, normally on the new school of Super, I would be joined by my partner in crime, Brian Parker, our chief economist here at Sunsuper.
But he's not with us today. And I know that you all love him very much. And so I apologise for that. But I'd like to think I've got something even better to bring to you. We have our chief executive officer, Bernard Reilly, and our chief investment officer Ian Patrick to talk to you about the experiences over the last two months and to bring those questions you've been asking out to the adviser community so that you have the answers you need to know.
Now, before we do that, I do want to point out, as silly as it seems, that this is general information only and give you that general advice warning. And in case there are any clients watching, that this webcast is just information only. It doesn't take into account your personal circumstances. And if you are thinking of actioning anything off this webinar today, please seek financial advice. Nothing can replace great quality financial advice. So we might kick off.I'll just introduce you both. We've got Ian Patrick, our chief investment officer. Hello Ian. Hello Anne, how are you? I'm very well. And then we've got, we've got Bernard Reilly, our CEO. How are you, Bernard? Great to see you. Anne I'm well. Good morning, all. I hope we don't disappoint you. You've built us up. Now, I hope ee don't disappoint relative to Brian.
Well, you know, he he is fabulous. He'll tell you all about that, as I jokingly say so. But that's that's why he is loved. He does bring . He's a great ambassador for Sunsuper. But I'm sure you will be fantastic. So, Ian, I might start with you, if that's OK, because we have been collating a number of the questions from our very valued registered advisers that recommend Sunsuper.. Before we do that though, how are you holding up what it's been like to be the CIO of one of Australia's largest super funds in a time like this?
It's funny, I said at some point along the path in early March. To my colleagues in the executive leadership team, strap yourself in. And little did I know at the time what I was actually saying. I think the relative order in markets,and I say relative order in markets more recently compared to the latter stages of March, mean it's been a slightly easier place to be monitoring and responding to the portfolio. But it is by no means straightforward from the point of view that there are many uncertainties still ahead as everybody who reads the news and holds on to the next press conference or whoever their favourite is, whether it's the governor of New York or Scott Morrison, you'd know, those uncertainties exist.
So we're in for tricky times, perhaps in stewarding people through their investment decisions over the next year, maybe two.
So Australia has obviously we've done a great job in containing the virus. And has that changed your view, the short and longer term view on the impact of the economy and the recovery in. I think it offers template for hope about the pace of recovery. But my personal view is there's still a number of unknowns. Epidemiologically there is still the risk of secondary outbreaks, whether it's here in Australia or anywhere else in the world.
The fact that we could see a policy response that closes up economies again or slows them down again. And so whilst it's encouraging that the curve that's being flattened to the extent it has and that will help everything from people's behavioural response. In other words, feeling confident to go out to engage in daily activity, start to spend money again across the economy, and hopefully, therefore create a shallower u in terms of the shape of the economic recovery. But I think it's very early to declare victory.
We're definitely a beneficiary of being, I think, an island state and being able to close the borders and manage the inbound infections. That's where we have an advantage for sure. And so, yes, it's probably somewhat optimistic on the Australian economy given the flattening of the curve. But I wouldn't hasten to say that we've still got to do that. We're going to avoid a severe recession and find it difficult in terms of the pace of recovery on the other side.
Do those insights around us being an island nation and the like, inform our view on asset allocation or where there are compelling investment opportunities to be found? I don't think so, because we're having said we are an island nation and that helps control the spread of Corona virus. We operate as a very open economy in a very global context. And as a consequence, and we've seen evidence of this in recent days, as a consequence, our customers for many of our products are external.
We can only generate domestic demand to support the economy to a point we're dependent on being able to export to a wide variety of markets. And if economies slow down and the political response to Corona virus is weaponized further and trade contracts, I'm not sure we're going to be in a tremendously good space, notwithstanding our ability to contain the virus itself.
But in terms of investment opportunities and particular asset classes. Andrew Fisher, our head of strategic asset allocation that many in the adviser community would know is what are him and his team thinking about as they seek to optimise our members, your clients retirement savings?
It's an interesting question because of the pace at which opportunities emerge. I think there's often an expectation when you see a sharp equity market sell off that opportunities will about. The reality is that it takes some time for bankruptcies and distress, other forms of distress to emerge in markets. And so what we're seeing right now in terms of opportunities is what I call are technical opportunities areas of the credit market, which are particularly technical in nature or where there's particularly liquidity stress, meaning people want to sell but don't have the ability to sell.
And therefore transactions are happening at distressed prices. But those are very technical opportunities. What we'll see in time is more of the distressed, distressed private equity, secondary, private equity, people trying to sell units in infrastructure and property funds at a discount to a move discount to prevailing price. Those will emerge as more stress sets in. And so probably into the second half of the year the breadth of opportunities will open up. Right now it's those technical opportunities in the credit markets.
It's participating in the capital raisings for Australian companies that want to improve their balance sheet position to weather the crisis. And a few other associated opportunities, but I think the real opportunities will emerge down the track.
There has been a lot of noise, particularly in some segments of the media, around alternative assets, and there has been also, too, for some time much debate in the adviser community about the role of alternative assets when you're risk profiling a client, are these assets, growth of a defensive? Has this experience changed your view on how we classify those assets Ian? It hasn't changed my view on how we classify them. I think it is important to reflect on perhaps a difference between now and the GFC.
In the sense that. Member behaviour, meaning the ability of an individual to make a decision to move from the balanced option or the growth option to cash.
Has stepped up a level, part of that, I think, is the fact that people are more engaged with super. Part of it is the fact that the market falls in this particular episode were much sharper than the grind slow grind down in the GFC. That means people are transacting in these unlisted assets by selling the balance. We have to be very attuned to equity between members who transact. So one thing that we have been responsive to is ensuring that the valuations that we mark those assets at are reflective of the underlying economic conditions, as uncertain as they may be we've got to make a decent attempt to do that. So we have seen the value of those assets marked down. Not anywhere near the extent of mark downs in listed markets. Does that mean that they play a different role in the portfolio? Absolutely not. They are still late for a combination of growth and defensive characteristics. And we would expect them to fulfill that combination of growth and defensive characteristics through a cycle. But in the very near term, they have exhibited some correlation to listed markets.
But that's because all underlying economic activity is the price, the macro effect. All assets like airports and shopping centers and office towers and the like. Liquidity also is part of this story around the role of diversified alternatives, and there have been some voices, I guess, that are almost being scaremongering around the role of diversified alternatives within super funds and the impact on liquidity and how safe your money is. What have been your reflections and insights during this crisis with people switching to cash with our exposure to unlisted assets, increased job losses and potentially an impact on, well we know there has been an impact on the net cash flow into the fund, though it obviously is still strong. What have been your reflections on liquidity as the CIO of one of Australia's largest funds?
My reflections have been that the preparations that you put in place for managing liquidity are everything. And the fact that we had a well-established liquidity management plan and a very well established stress testing program, whilst they didn't foresee a pandemic like the COVID- 19 pandemic, they were intended to replicate the types of member driven switching activity, market falls, perhaps exits of blocks of members not anticipated to be early release, but perhaps because there was a large participating employer, really, everything was built into the stress testing program. So what we've seen in practice through this has been well within the parameters with which we stress the portfolio as part of our overall liquidity management. And that means the portfolio has been exactly where we would have liked it to have been positioned in this environment. In other words, we able to raise liquidity, be prepared for all the necessary payments due to early release and not undermine the long term strategic positioning of the portfolio. So it's served, I think, particularly well. And that's about preparation. It's not about being able to foretell the future. And that's been quite, quite useful and gratifying to me. But it also proves, given the the policy change that we saw, that you need to be conservative in your stress testing, because there are always the unknowns in this instance, the policy change.
That's certainly very true. I think that's the one thing we all know now, it's just to continue to expect the unexpected, you can't possibly predict the future. Bern, I might throw to you if that's okay, because Ian touched on that, obviously, the policy around early access. How long have you actually. How long have you been CEO now? Does it feel like a long time?
It feels like , so it's only just over six months. And it feels like the time's gone really quickly and the time's actually gone really slowly. But we think about early release there's a couple of important context here, so think about the fund as having 1.4m odd members spread across the country. But as a multi industry fund, we spread across the entire economy. And so I think while at the early stages of this crisis, it was certain parts of the economy that were more affected. The retail and hospitality sectors and the like. As you know, over a million people were stood down from their jobs, it's really been spread across the economy. So we've seen that spread across our member base, who have been impacted by this. And so then when we think about early release in particular for us I think through yesterday, it's about one hundred and thirty odd thousand members who have elected to take early release for about $950m. And we've been able to pay members that ten thousand dollars,or whatever amount they had up to that $10,000 limit, we've been able to pay them in two days. And if you think about that from a business perspective; one of the first things I did when I came in was I actually looked at the fact that we self administer and looked at that and thought. Does that make sense? And what's our, what is the benefit to our members for us to do that rather than outsource that? And I think this is clearly one of those times when having our own administrator in-house has been a great advantage for our memebrs to be able to to pivot and pay out funds as we needed to. But also having our own contact center in-house. The the last two months, April and March, we've seen double the number of calls into the call center for members who have either been concerned about the market volatility or members who wanted to get some more information about early release. And so to give you a context of numbers, that's about 150,000 phone calls, the Contact Centre took over those two months, which just is double what we normally would take. So I think having the resources in-house to be able to respond, I think is also really important from a longevity perspective, because members will remember how you responded when they needed you.
I, I couldn't agree more. And I think, too, it's been great,we've been able to. We've hired sixty five family and friends of staff to help dig in and do all of this paperwork and administration, answering the answering the calls that need to be answered during this time, said 65 extra people in the economy that have got a job.
Do you think actually in respect to liquidity, Bern, do you think this has, has this rattled you as the CEO? Have you felt stressed at all? Have you lost any sleep at night? What's been happening with employee SG. What what are your insights?
So firstly, I started off six months ago with grey hair, I still got the grey hair so I don't think it's stressed me that much. I think what I've noticed is coming into an organisation new as the CEO, you do wonder how the organisation will respond to a crisis and I think, so an early test in my my tenure as CEO,has been a good one. I think the organisation across the board has served me members well. I mean, Ian spent some time talking about liquidity valuation and I've experienced a lot of that first hand. And I've got a 30 history financial services, largely funds management, so I've seen different crises ,but none of them are the same. And so the way that we responded with liquidity, being able to make sure we had enough liquidity, the way we thought about valuations, why we just about listed equity and fixed income market allocations, I think that has been handled in an unbelievable manner for our members firstly. But then I look at the rest of the organisation and I think about the fact that our Contact Centre, as I mentioned earlier, were able to respond the way that we've been out of reach out to the adviser community. And then I think that our 1100 staff, who in February hardly anybody worked from home to where we've now pivoted had the whole organisation work from home. So I think it tells me a couple of things about the resilience of the organisation, the fact that we're able to adapt quickly, to respond to the needs of our members and also the environmental factors that we find ourselves in. I know we did, when I was early on my first month or so, we did a BCP, business continuity test and part of that was about us being out of work from our disaster recovery site; that didn't consider social distancing. And so the fact that we were able to not just rely on that, but then pivot away from that and be able to have people work from home, I think reflects the thinking and the preparedness across the board with the organisation to eb able to serve members.
And I would like to echo those comments Bern, certainly the advisers, the members that we have a financial advisor looking after them have been very well prepared to handle and to weather this weather this storm. There have been many members that have been performing acts of self-harm that are not advised that have been switching to cash at the start of the crisis. And if we look, there will be a retrospective down the track where we'll have some great data to understand what our advised members did, and we very much appreciate the care that you've taken for the members so that they can sleep at night and their retirement savings are secure. But Bern around SG, there's a little bit of, do you have any insights around SG?
If you look at SG, the first quarter SG has to be paid through the end of April, as many of advisers would be aware. And our SG was actually above what we'd forecast, and we'd forecast a very healthy SG number for the first quarter of this year. And so I think that's an interesting reinforcement both from the employer and the member community around the importance of superannuation. And so even though we're going through a difficult time, sorry, my dogs barking in the background,that's what happens when it's live. I think that's a really important aspect, the value I think Anne mentioned, I think that we'll perhaps see more engagement. But I think that this is reflected I think in the SG and the engagement we're having with members around the fact that the value that they put on the ability for this as a savings vehicle is really important.
Just a personal reflection that my dog Larry the German short haired pointer is really as happy as Larry having me home and maybe one day we can all bring our dogs into the office. So I'll continue lobbying for that unsuccessfully I'm sure,but the dogs have never been happier across Australia.
Bern, what's your view of the QSuper merger and has COIVD impacted that at all? Particularly Queensland advisers very interested in this development.
We're still committed to going through the process,most definitely. And I think if anything when we talk about where mergers and the like are going to go I think it still has a lot of strategic rationale for us to really seriously consider this. It's slowing down, the process has slowed down a little bit, given the pivot to work from home and the market environment, it's probably delayed us a couple of weeks, but now we've got a team within Sunsuper that's dedicated to look at this. And so they are actually up and running, some from the office where Anne is and some from home to actually focus on this at the moment. So, as I said, I think we've slowed down a little bit, we're still committed to to to look at the process that we're going through, really to continue to to focus on this and look at the benefits. But I will say again, I think in one of our earlier discussions we mentioned, it really needs to still the criteria for success for this is needs to be in the best interests of Sunsuper members. It also needs to be in the best interests of QSuper's members for both parties to agree and then finally there needs to be in the best interests of the combined membership base to make sense. And so we're still working through some of those issues at the moment to see whether that's the case or not.
Do you think we'll see more an acceleration of super fund mergers? There's been talk about it for some time, but it has been quite sort of lethargic, shall we say. Are we going to see some more velocity?
I think we will. I think what's going to happen after, so a combination I think of market volatility that we've seen , member demands and I also think early release has a part to play in that. I think it's going to mean costs are going to go up in broadly across the industry. And so I think that's going to drive more on the merger discussions. I think, coming out of this, you know hand on heart, we've performed for our members well as well as it relates to investment returns. I think pivoting for liquidity and also early release. Probably not, I don't I think every fund will be able to say the same thing. And I think, therefore, their members, as we know, will have choice, will also reflect on that and think are they in the right fund. As I'm sure will the adviser community reflect that on behalf of their clients. And so I think we will continue to see movement in the membership basis, and I think we will see increased velocity associated with merger activity. But it'll again, it'll take some time I think.
Well, you mentioned the adviser community Bern, and it's been five years, I guess, since we opened our doors to work with financial advisers across the country; we were the first industry fund to do so. And I'd like to think that we are doing it for the good of everyday Australians who want financial advice and need access to a high quality, low cost product like ours. But we also recognise most advisers are small business people and have themselves to pay, staff to pay, businesses to run. And in a regulatory climate as it is, it's harder and harder and more expensive to provide financial advice, which is why being easy to do business with as a product manufacturer is so very important. What what could you share with the adviser community around what we're thinking about to achieve that goal?
I think there's a couple of parts I think I'll add to your comments around the adviser community being small businesses. But also they're small businesses that generally have face to face contact. And so we're in an environment , we're all here on Zoom, I imagine that the advisers are finding the same, having the same discussions with their clients via Zoom or whatever technology platform they use. And that makes it difficult when we think about physical signatures, when we think about ID and the like and so some of the things that we've been focused on are and digital signatures. So now we've gone down the path with a product from Adobe and we're looking at one that's very popular in the market is Docusign. And so we're looking to integrate that into our processes as well, to allow the adviser community to be able to use Docusign as well as Adobe sign to be able to that electronic signature. And then also when we think about ID, electronic ID member, we're looking at ways, I know we're still looking at forms, we're allowing that we're looking at ways to be able to allow your clients, our members to be able to to identify themselves electronically.
The other part I wanted to mention as well, I think is around a lot of members that are in pension phase; one of the things that we've done recently is update the information with the Department of Human Services as well. So thereby updating the balances that, because we've seen a drop in the balances based upon market moves and so updating those balances, then makes it easier obviously for your clients points to, in their discussions with the Department of Human Services around balances and the like. So they're a are a couple of steps that we're taking at the moment.
I think Anne and her team continue to have great dialogue with the community, the adviser community, and we'll take that feedback on that you give us and try and incorporate that as quickly as we can to make your lives easier, particularly in what's really a difficult environment for your clients, where they're concerned about the volatility in the market, I know they have been, we've had calls from a number of clients directly, obviously, through that call center and and also through the advice community we've seen that as well. So I think the way any way that we can work together to make it more effective for your clients is important to us.
I think when we talk about financial advice, it's certainly a doctrine of faith we have here that I jokingly call it the Holy Trinity, which is a reflection of my sort of upbringing, the Irish Catholic upbringing, but the holy trinity of retirement outcomes being a strong, reliable investment performance, high quality, low cost product, and then working with you high quality personal financial advice to ultimately deliver on the best retirement outcomes for Australians.So we know you play an important role in that.
Bern are there any final reflections as the CEO that you would like to share with our viewers today?
Thanks Anne, I think firstly its around preparation and preparedness and Ian mentioned that around from the investment side, the way we thought about valuations, liquidity and the like, prior to any crisis. And I think from a business perspective, a lot of the work that we've done around that also is important. I think that then flows on through to your clients and the members as well, around preparation. But it's more that preparation for market volatility and also from the timing, and how our members and your clients think about that and then the role really that advice community plays in that is vital. Around how do you you prepare? Yeah, this is this would be the first for some of our members, our younger members, this will be the first market downturn they've experienced and therefore how they respond to that I think is important. And then those members who are close to retirement, you know the market's have dropped, we've seen some recovery, but that has an impact on the corpus they have for retirement how they seek advice from you to actually fulfill their retirement dreams is a really important part of that time. I think preparation's the big thing I've learned from this. So then the final comment I'd make as I know we're running out of time is to thank you, the adviser community, for supporting us. We've tried to be there it in different forms, obviously from input from the contact centre, from Anne and her team and Ian and the investment team. But your support is important as we all work through what's really, I hate to use the word unprecedented because everybody's using it, but in an unprecedented environment.
It is it's like flattening the curve; I never want to hear that expression again either. And to that end, around providing information, particularly around the investment team, we know that confidence in our investment methodology and performance is so incredibly important. But not just that, transparency is critical. And so we are having a webinar series, a deep dive on all of the components that make up our diversified alternative investment class. And we will be going through a deep dive case study on how we identify different assets, the due diligence we undertake, the role that those assets play in the portfolio, how we decide if we end up divesting of a portion or all of an asset; to give you that confidence that we really are a safe pair of hands as an investor, to manage your client's money.
You can, of course, contact Mark Stubbings and the business development team based around the country if you have any questions, your BDM can help you in. Ian Patrick, I'll throw to you for a final remark before we close.
It's an oft said thing, but I think it bears repeating, and that is that crises inevitably end and they inevitably create opportunity. And the appropriate thing right now is to think through the crisis to what is going to be important in ensuring those opportunities are exploited. And that's where we are very focused and I'm sure all advisers are too for their clients. But markets will recover and we will all reflect back on this at some point as an interesting but worthy test for investment portfolios.
Ian and Bernard, on behalf of the adviser community, thank you for your continued accessibility and transparency in providing information. And to our viewers, thank you for joining us. And we look forward to seeing you again soon.