Super Funds & Private Market Investing Rangelands: Sustainable Economic Development in WA, Conference 2016

Important Disclaimers 2 This presentation contains general information only and does not take into account your specific objectives, financial situation or needs. It is therefore important, before deciding whether to become a member of First State Super (or, if your already are a member, to continue that membership) that you consider the First State Super Product Disclosure Statement having regard to your own situation. Please call Customer Service or visit our website for a copy. The information provided is based on our interpretation of the law applying at the date of this presentation and is subject to change. It is recommended that you consult a licensed or authorised financial adviser for financial advice which takes into account your personal circumstances at the relevant time. Past performance data shown in this presentation is for the periods stated and should not be used as a basis for projecting future returns of asset classes, investment managers or investment funds or products. Any statements in this presentation are not intended to imply, nor should be interpreted as conveying, any form of guarantee or assurance by FSS Trustee Corporation or its employees, either to the intended recipient or any third party, of the future performance of any investment manager, fund or asset class, either favourable or unfavourable. This presentation is not intended to form the basis of any decision by any party to do or omit to do anything. FSS Trustee Corporation (ACN , AFSL , RSE L ), is the trustee of the First State Superannuation Scheme (ABN , RSE R , SPIN FSS 0100AU).

Agenda 3 superannuation funds – purpose & objectives approach to investment and risk management what institutional investors are looking for

Types of investor 4 Small investors, SMSFs Special-purpose funds, e.g. infrastructure Hedge funds Private equity funds Pensions funds, SWFs Corporations (strategic)

Super funds – our ultimate purpose 5 First State Super Manages the retirement assets of 750,000+ members Average age ~44yo, average balance on retirement ~$250k Nurses, teachers, police … strong “members first” culture Investment choice and objectives Default fund is the “Diversified Option” 70% Growth Assets, e.g. shares / 30% Defensive Assets, e.g. bonds Long-term return objective: CPI+3.75% p.a. over time Expect an annual loss 4-5 years in every 20 Investors can choose more “Capital Stable”, “High Growth” or “Socially Responsible” options

6 What’s keeping us up at night?

7 Four broad “asset classes” cash bonds shares alternatives

Diversification … the first line of defence 8 across asset classes …and within asset classes High Yield Debt Infrastruc- ture Property Private Equity Agriculture & Commodities Alternatives

What are super funds looking for 9 Generally Ability to understand risk and undertake due diligence Compelling reward for risk Strong alignment of interest Long-horizon investing and sustainability (“universal ownership”) Direct Investments Minimal “agency risk” … trusted, experienced operating partners Avoid competitive procurement processes (and lost bid costs) (At least negative) control Scalability, adaptability and scope to leverage our size … strategic owner

Reward-for-risk 10 Req’d return = 12.5% Rationing capital across the best ideas … Opportunity A

Investment models 11 Members Beneficiaries Principals Sponsor(DB) Board / IC Board CEO/CIO Front Office Middle Office Internal Team Asset consultants Specialists Advisors Prime Managers Other Managers Fund/Asset Managers Investment Banks Corp. Advisors Stockbrokers Bankers & Brokers Corporate Boards CEO/CFO Corporate Executives Assets Portfolios Assets  Indirect (pooled funds)  Co-investments  Direct Investments The industry “value chain” and principal-agency risk

Case study – Select Harvest Orchards

Case study – Sydney Light Rail (Infrastructure)

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