1. anywhere from a Queensland coal mine to
an office on Collins Street. The fund has a
distinct bias to growth assets, a reflection of
its comparatively young workforce.
It also offers enhanced insurance options,
including a partial disability or ill-health
benefit, which acknowledges the higher-risk
vocations of many resources workers.
Members can choose to invest in individual
asset classes or one of its four pre-mixed
options. It does not offer a "balanced" option
and 65 per cent of the fund is invested in the
default growth strategy.
The tilt towards growth assets goes some
way to explain the strong performance,
but it also creates a direct link between the
fund and the average self-managed super
fund because SMSFs are typically growth
orientated and contain plenty of shares.
Another similarity between Rio's fund
and your garden-variety SMSF is that its
exposure to the sharemarket is 100 per
cent active. Rio pays fund managers to look
after both its local and international equity
exposures, which runs counter to the trend
of institutions swapping active for lower-cost
:
SMART PEOPLE
From coal
mines to
Collins Street
The strategies employed by Rio Tinto's top-
performing staff superannuation fund can
and should be explored by self-managed
super fund members, writes James Frost.
I
t's an open secret within the
superannuation industry that the best
performing funds are run byinsiders.
Over the past 10years the super
funds run by and for the employees
of Goldman Sachs, the Reserve Bankof
Australia and Commonwealth Bankof
Australia can be found among the top five
performing funds of almost any given year,
according to data collected by the Australian
Prudential Regulation Authority.
But in 2013-14, a fund run by a company
not normally associated with high finance
broke ranks and stormed home with a
13.8 per cent return - muscling its way into
fifth spot in the process. That fund was Rio
Tinto's S5.3 billion staff super fund, chaired
by managing director Phil Edmands.
"We like to keep things pretty simple,"
Edmands says."We are seeking consistent
returns that are a little bit better than
the market and we hope that will lead to
significant outperformance over time."
The 70-year-old fund has more than
30,000 members who work across Rio Tinto's
Australian operations. The fund caters to
a broad mix of staff who could be working
Page 1 of 3
18 Sep 2015
Australian Financial Review, Australia
Author: james frost • Section: Smart Investor • Article type : News Item
Audience : 57,243 • Page: 6 • Printed Size: 754.00cm² • Market: National
Country: Australia • ASR: AUD 13,184 • Words: 858 • Item ID: 467169657
Copyright Agency licensed copy (www.copyright.com.au)

2. index or index-enhanced strategies.
"Wehave been able to find active managers
with the expertise to add value and sowe
don't have any plans to move to passive
at this point," Edmands says.Riogives
mandates to a small number of Australian
equity managers including Balanced Equity
Management, Fidelity, Paradice Investment
Management, Integrity Asset Management
and Renaissance Asset Management.
The fund has close to $500 million
invested with Andrew Sisson's Balanced
Equity Management. BEMis well known
for two things: its comparatively small
"Fund managers are people too; they can't
be perfect every day of every month of every
year. We look at things over the long term
and understand that they need some leeway.
We are notjust flipping between managers."
Perhaps the best measurement of the
fund's success is its high take-up among
Rio staff. About 21,000 staff members
from a pool of 23,000 havejoined, with an
additional 10,000 former employees and
spouses also choosing the fund.
"In terms of the feedback we get from
members, we are highly regarded and they
like what we do," Edmands says.
"When Istarted working for RioTinto nine
years ago, I got some professional advice
about whether Ishouldjoin the fund. They
[took a] good look at it and told me that I
wouldn't do better anywhere else. Ihaven't
looked back since."H
management fee and its ability to
consistently beat the index without shooting
the lights out. This philosophy dovetails
neatly with the fund's aims.
Fund managers are selected by the
investment committee in conjunction with
asset consultants JANA, a subsidiaryof
National Australia Bank. The performances
and processes of fund managers on the roster
are then reviewed regularly. "We certainly
keep close tabs on what they are doing. Our
internal team and JANAare both very hands
on in this respect," Edmands says.
"If a manager had a process that we
liked and that changed we would seekto
review that. If there were staff changes that
concerned us then we would look at it as
well. Sometimes you come across a manager
who is unequivocally better."
Achange in investment process at the
global investment firm GMO,founded by
respected investor Jeremy Grantham, is
believed to have led Rio Tinto to dump
the manager. GMOran a mandate worth
$164 million for the fund during 2014-15.
Members of Rio Tinto's staff super fund
will be informed of the change in managers
when its annual report is distributed in
: coming weeks. Edmands says Rio takes
a long-term view and it seeks to avoid
switching managers if possible.
WE HAVE BEEN ABLE TO
FIND ACTIVE MANAGERS
WITH THE EXPERTISE TO ADD
VALUE AND SO WE DON'T HAVE
ANY PLANS TO MOVE
TO PASSIVE.
Page 2 of 3
18 Sep 2015
Australian Financial Review, Australia
Author: james frost • Section: Smart Investor • Article type : News Item
Audience : 57,243 • Page: 6 • Printed Size: 754.00cm² • Market: National
Country: Australia • ASR: AUD 13,184 • Words: 858 • Item ID: 467169657
Copyright Agency licensed copy (www.copyright.com.au)

3. «•
I
; ^ ^ *--r
PROFILE
Phil Edmands
e: Managing
director, Rio Tinto
Australia
Other roles: Chairman
of Rio Tinto Staff
Superannuation Fund
Page 3 of 3
18 Sep 2015
Australian Financial Review, Australia
Author: james frost • Section: Smart Investor • Article type : News Item
Audience : 57,243 • Page: 6 • Printed Size: 754.00cm² • Market: National
Country: Australia • ASR: AUD 13,184 • Words: 858 • Item ID: 467169657
Copyright Agency licensed copy (www.copyright.com.au)