financial services council investment management questionnaire investment... · financial services...

FINANCIAL SERVICES COUNCIL

INVESTMENT MANAGEMENT QUESTIONNAIRE

VERSION - NOVEMBER 2011

Manager’s Name: Smarter Money Investments Pty Ltd

Questionnaire response date: 31 December 2015 _____________________________________________________________________

Qualitative Liaison

Name: Rob Morton Position: Head of Investment Products Email: [email protected] Phone: 02 8226 8313

Quantitative Liaison

Name: Christopher Joye Position: Portfolio Manager Email: [email protected] Phone: 02 9389 6106 _____________________________________________________________________

Table of Contents

SECTION 1 – NON INVESTMENT INFORMATION .................................................................................................... 1

1 ORGANISATION AND STAFF ........................................................................................................................... 2

2 COMPLIANCE AND RISK MANAGEMENT ...................................................................................................... 10

3 CUSTODY OF ASSETS ..................................................................................................................................... 18

4 CUSTOMER SERVICE AND ADMINISTRATION .............................................................................................. 20

SECTION 2 – INVESTMENT INFORMATION .......................................................................................................... 24

5 INVESTMENT PHILOSOPHY (FIRM-WIDE) ..................................................................................................... 25

6 AUSTRALIAN FIXED INTEREST ....................................................................................................................... 29

7 INVESTMENT PERFORMANCE ...................................................................................................................... 41

FSC Investment Management Questionnaire

Page 1

SECTION 1 – NON INVESTMENT INFORMATION


Page 2

1 Organisation and Staff

1.1 State the name of the person responsible for the content of this section. Please provide the following: • Rob Morton • [email protected] • www.smitrust.com.au

1.2 Outline briefly the key dates and events in relation to the “corporate” history of your investment management organisation (i.e. date founded, changes in capital structure, mergers/acquisitions, etc.) using a time-line format:

• Oct 2011: YBR Funds Management Pty Limited established by Darren Harvey and Christopher Joye in joint venture with distributor Yellow Brick Road Holdings to focus on active cash and fixed-income product development.

• Nov 2011: The Smarter Money Fund (Smarter Money Active Cash or SMAC) is established as an active cash/short-term fixed-interest trust targeting returns above the RBA cash rate plus 1% after fees.

• February 2012: Harvey and Joye in concert with Yellow Brick Road seed SMAC with ~$5.5m.

• February 2013: SMAC completes first year track-record with a 7.7% per annum return after all fees. SMAC's returns were ranked in the top 10% of the Morningstar Short Term Fixed-Interest Universe (over 40 products).

• February 2013: SMAC's first year return volatility on an annualised basis is a low circa 0.7% per annum, resulting in a very high risk-adjusted return, or Sharpe Ratio, of over 4 times.

• June 2012-March 2013: SMAC independently rated and reviewed by three research houses, including Atchison Consulting (Recommended), Australia Ratings (A), and McGregor Consulting (Investment Grade).

• June 2012-March 2013: SMAC added to three investment platforms: Macquarie Wrap, Asgard, and OneVue.

• June 2012-March 2013: SMAC added to multiple APLs, including AIOFP, Madisons, OneVue Super Fund, and MAP Super Fund.

• December 2013: SMAC ends 2013 with 4.6% net return after all fund fees with volatility a low 0.6% pa. SMAC's returns were ranked in the top 10% of the Morningstar Short Term Fixed-Interest Universe (over 40 products) in 2013.

• January 2014: SMAC total FUM reaches $100 million.

• May-September 2014: SMAC rating upgraded from "Recommended" to "Highly Recommended" by Atchison Consulting and "A" rating with Australia Ratings reconfirmed.

• May-September 2014: Mercer awards SMAC its first investment-grade rating of B+.

• May-September 2014: Total FUM for SMAC reaches $150 million.

• September 2014: YBR Funds Management rebranded to Smarter Money Investments Pty Limited to reflect increasingly large share of non-YBR inflows (no change in ownership or personnel)

• May-September 2014: SMAC added to over 33 different Approved Product Lists with numerous IFA dealer groups


Page 3

• May-September 2014: SMAC added to numerous platforms, including Macquarie Wrap, OneVue, Hub24, Netwealth, Asgard, UBS Private Bank, ASX mFund, Mason Stevens, Colonial Custom Solutions and PowerWrap

• September 2014: New Smarter Money Higher Income Fund (SMHI) seeded with $15 million from an existing institutional investor, MAP Super.

• December 2014: SMAC ends 2014 with 4.1% net returns after fees again placing it in top 10% of Morningstar products in the Short-Term Fixed Interest Universe (SMAC's volatility stays at a low 0.6% with a Sharpe Ratio over 4 times). SMHI finishes last quarter of 2014 with 5.2% annualised return after all fees.

• December 2014: Total FUM rises to over $180m. SMAC also awarded new $30m and $50m mandates that once implemented would lift total FUM to $265m

• January 2015: SMAC added to BT Wrap platform

• March 2015: The Bennett family, which is a multi-billion dollar investment group became a large investor in SMI's products and acquired a 25% ownership stake in Coolabah Capital Investments Pty Limited (which is 75% owned by the investment team). Total FUM now $290m.

• December 2015: Total FUM now exceeds $320m.

1.3 Provide an organisation chart showing the ownership structure of the investment management organisation and subsidiaries of the parent company. Also show the proportion (%) owned by principals of the company, other financial organisations (include names) and outside individual shareholders

1.4 Please state the number of staff and how many are investment professionals. • Smarter Money Investments Pty Ltd has a board of directors and investment

committee comprising the following individuals: o Adrian Bouris (investment banker/lawyer and Yellow Brick Road Director) o Matt Lawler (banking/funds management and CEO of Yellow Brick Road) o Darren Harvey (specialist portfolio manager) o Christopher Joye (specialist portfolio manager)


Page 4

• Smarter Money Investments’ executive team comprises the following individuals: o Darren Harvey (specialist portfolio manager) o Christopher Joye (specialist portfolio manager) o Rob Morton (strategy, product management, business management) o Gary Walsh (business development) o Cosimo Vallelonga (business development) o Steve Adamek (credit analyst – part-time) o Phil Bayley (credit analyst – part-time) o Ed Teh (credit analyst) o Andrew McLachlan (credit analyst) o Alex Palfi (risk analyst – consultant) o Tao Peng (quant analyst – part time)

• Smarter Money Investments’ compliance committee for its unitised fund is managed by its independent responsible entity, OneVue RE Services Limited, who provides responsible entity services for investment groups with over $2.6 billion under administration.

• Smarter Money Investments’ unitised fund administration and processing is managed by its independent fund administrator, MainstreamBPO (or “FundBPO”), which has more than $40 billion in funds under administration

1.5 Please outline any key staff turnover in the past 2 years of both senior executive and senior investment staff. • There has been no senior staff turnover since inception over 2 years ago

1.6 List any companies shown in the above organisation chart that have been rated by a debt-rating agency. Specify the rating achieved and the name of the rating issuer. • YBR Holdings is an ASX listed company with a market capitalisation of approximately

$75 million. YBR Holdings has not been rated.

1.7 State the business targets that are set for the investment management organisation and briefly describe the strategies that will be used to achieve those targets. • Smarter Money Investments Pty Ltd is an active cash and fixed-income investment

manager. Smarter Money Investments has two retail/wholesale trusts, called the Smarter Money Active Cash Fund and the Smarter Money Higher Income Fund.

• Business objective: Smarter Money Investments aims to raise, in excess of $2 to $5 billion + in third-party capital.

1.8 What support does the Parent provide in terms of financial, technical, systems integration or personnel? • Yellow Brick Road Holdings Limited has four full-time (Rob Morton, Cosimo

Vallelonga, Juliet Shirbin & Gary Walsh) product and distribution professionals to support the growth of Smarter Money Investments.

• Yellow Brick Road Holdings Limited is responsible for all operational management, product management, third-party service-provider management, customer service, legal support, financial accounting, advertising, marketing, and distribution of Smarter Money Investments’ investment products.

• Yellow Brick Road Holdings Limited contributes to Smarter Money Investments’ back-office infrastructure, business continuity support and disaster recovery support.


Page 5

1.9 If applicable, outline any Parent guarantees or limited liability agreements with the Manager. • Yellow Brick Road Holdings Limited committed to underwrite all of Smarter Money

Investments’ working capital requirements until the business reached cash-flow break-even. Smarter Money Investments is cash-flow positive.

1.10 Approximately what proportion of your Parent company’s revenue is generated by your investment management organisation? • It is currently less than 5.0%. The target once the business matures is more than

15%.

1.11 List any organisations with which you have formal affiliations and provide a brief overview of the nature of each affiliation. • N/A

1.12 List any investment and investment related service providers (e.g. custody, settlement, IT, compliance, administration, customer service) to the organisation and provide a brief overview of each service. • Winston Capital (third-party distribution) • BNP Paribas (Custodian) • MainstreamBPO (Unit Registry, Fund Administration, Fund Performance

Calculations) • OneVue RE Services Limited (Responsible Entity Services) • Software and data providers: Interactive Data (Bond Pricing); Yield Broker (Bond

Trading); S&P Capital IQ (Credit); Bloomberg (Pricing); Real Time Trading Systems (RTS)

1.13 List any products that are closed to new business. Where possible, it would be helpful if you could also list those products that may be closed over the next year. • N/A

1.14 Which investor groups does your company primarily target? • Institutional investors, platform investors (via financial planners), mid-market

corporate entities and retail/direct investors

1.15 What are the major factors affecting change in your market share over past five years? • Key drivers have been

o Risk-adjusted performance o Distribution o Client service and communications

1.16 What are your capacity targets as a funds management business? Please state for each key strategy offered. • Capacity for the Smarter Money Active Cash is ~$2.0 billion • Capacity for the Smarter Money Higher Income is ~$2.0 billion

1.17 Outline your approach to taxation management and the reporting and provision of after-tax returns, if applicable. • For any unitised Managed Investment Schemes: these are fully distributing unit

trusts that distribute all capital and income on a pre-tax basis to unit holders

1.18 Provide a complete organisational chart for your investment management business (including investment management, sales/marketing, administration and compliance) and


Page 6

give a brief description of the “key” reporting lines. Include reference to overseas investment management offices and staff.


Page 7

Smarter Money Unitised Managed Funds


Page 8

1.19 Please supply biographies for each of the investment personnel in word format as an Appendix. • Please see attached.

1.20 How is performance of members of the investment team assessed? Please explain the remuneration scheme for key people, particularly the bonus structure and the manager’s share of the performance fee. Please provide detail on equity ownership of senior key staff. • Coolabah Capital Investments is 75% owned by the investment team and 25%

owned by the Bennett family, which is a multi-billion dollar investment group that is a large investor in SMI's products. The two portfolio managers are remunerated through cash-flows Smarter Money Investments generates from management and performance fees. The two portfolio managers’ compensation is primarily equity based and also includes a salary. The two portfolio managers and their immediate families are also substantial investors in the fund.

• Rob Morton, Gary Walsh, Juliet Shirbin and Cosimo Vallelonga receive salaries and bonuses paid by YBR Holdings Limited.

• Steve Adamek, Phil Bayley, Ed Teh, Andrew McLachlan, Alex Palfi and Tao Peng are paid at competitive market rates by Coolabah Capital Investments.

1.21 Outline your Board compensation policies. • Smarter Money Investments Pty Ltd’s Board receives no compensation. However, all

board members are shareholders in Smarter Money Investments either directly or indirectly through Coolabah Capital Investments and Yellow Brick Road Holdings.

1.22 Outline your approach to succession planning in regards to the Board and the investment team. Indicate the back-up person for key business and investment management positions. • The Board comprises the two key investment managers together with senior

personnel from Yellow Brick Road Holdings Limited. • Yellow Brick Road can source alternate Directors if required from its own senior

management team and Board. • Split of Portfolio Manager responsibilities:

• Both are responsible for investment idea generation • Harvey manages trading strategy, including the timing of entry & exit of

trades and how to implement a specific idea • Joye manages the fundamental analysis, macro-research and credit

analysis and trade execution (with assistance from Ed Teh) • There is immediate redundancy in the event that one of the two Portfolio Managers

is incapacitated • There is additional redundancy across the SMI credit analyst team

• SMI Credit Analysts: Steve Adamek, Phil Bailey, Andrew McLachlan and Ed Teh.

• Whilst actively managed, the portfolio of securities will comfortably accommodate any short-term disruption to the portfolio management team

• Smarter Money Investments’ investment strategies are transparent and interim management arrangements are available and would be activated immediately if both Portfolio Managers were incapacitated


Page 9

• The Responsible Entity of the funds, has significant direct fixed-income expertise and $2.6 billion in FUA, and would be able to provide a transitional management solution

1.23 Please supply, as an attachment, your Parent’s and your firm’s most recent Annual Report. • Yellow Brick Road Holdings Limited: Click here or go to www.ybr.com.au

http://www.ybr.com.au/investor/investorinformation.cfm

http://www.ybr.com.au/


Page 10

2 Compliance and Risk Management

2.1 State the name of the person responsible for the content of this Section. Please provide the following: • Rob Morton • [email protected] • www.smitrust.com.au

2.2 Does the company have a dedicated compliance officer? • The Responsible Entity of Smarter Money Investments Pty Ltd’s unitised managed

fund, OneVue RE Services Limited, has a dedicated Compliance Manager • In addition, Smarter Money Investments Pty Ltd is a Corporate Authorised

Representative of Yellow Brick Road Investment Services Pty Limited. Yellow Brick Road Investment Services Pty Limited has a dedicated compliance officer.

2.3 How is compliance structured within your organisation? • Smarter Money Investments Pty Ltd has retained the services of an independent,

professional Responsible Entity that has no relationship with Yellow Brick Road Holdings Limited or Smarter Money Investments Pty Ltd. OneVue RE Services Limited, maintains an independent compliance committee that has no relationship with Yellow Brick Road. The Responsible Entity oversees Smarter Money Investments Pty Ltd’s unitised managed fund compliance and risk-management on an arms-length basis.

• In addition, Smarter Money Investments Pty Ltd carries out its own internal compliance and risk-management via its Board and compliance officer (Yellow Brick Road Investment Services Pty Limited).

2.4 Is there a written Compliance Manual? Please provide. • The Responsible Entity for the Smarter Money Funds has MIS Compliance Plans.

2.5 Provide details of your license(s) to manage funds under the Corporations Law. This should include details of how you will operate under MIA (e.g. independent directors, Compliance Committee, Custody, Capital, Capital Adequacy, Professional Indemnity Cover, Bank Guarantees, Fidelity Insurance, external audit etc.) and the nature of your membership of the Sydney Futures and Australian Stock Exchanges. If applicable, provide details of licenses held by any affiliate group in your overall organisational structure. • Smarter Money Investments Pty Ltd has entered a Corporate Authorised

Representative Agreement (Authorised Representative Number 414337) with Yellow Brick Road Investment Services Pty Limited (ABN 86 003 990 627) AFSL 255016

• A copy of the License is attached with this document • Smarter Money Investments Pty Ltd is not a member of SFE or ASX, though it is a

CHESS participant for ASX mFunds

2.6 Please list the Directors and whether they are independent: what is their relationship to the company and how often do they meet? • The directors of Smarter Money Investments Pty Ltd are:

o Adrian Bouris (Director of Yellow Brick Road Holdings Limited) o Matt Lawler (CEO of Yellow Brick Road Holdings Limited) o Christopher Joye (Portfolio Manager, Director Coolabah Capital) o Darren Harvey (Portfolio Manager, Director Coolabah Capital) o Meeting frequency: Monthly


Page 11

2.7 Do you currently hold insurance for the Directors or Key Personnel or others? • Yes

2.8 Please state the composition of the compliance committee(s) and list the dedicated compliance personnel. • Paul Dortkamp - Paul has been involved in the Australian securities industry since

1971 and has extensive experience across the main asset classes within a diverse range of large and small organisations. Since 1997 Paul has been the principal of Rivergum Investors, a consulting firm specializing in investment process and compliance.

• James McNally - James has over 18 years’ experience in the funds management industry having worked in both property trust administration and compliance roles for Perpetual Trustees Australia Limited and MIA Services Pty Limited, a company that specialises in compliance services to the funds management industry.

• Francis Cox – Francis is a Lawyer and Compliance Manager with over 30 years of professional experience and a demonstrated ability to provide corporate and departmental management leadership, ensure accurate and timely legal advice, and review and implement policies, procedures and standards.

Compliance & legal dedicated professionals: • Craig Giffin (Head of Compliance) • Alice Yeh (Compliance Officer) • Georgina Burke (Internal Auditor) • Steven Fuller (Lawyer) • Tania Langov (Lawyer) • Jennie McQueen (Lawyer)

2.9 Outline your compliance policies and reporting procedures (including the process for

dealing with compliance breaches). List all incidents over the last year where, as a result of a mandate compliance breach, a loss or a potential loss to a client occurred.

Responsible Entity’s Procedures

On becoming aware of an actual or potential breach or other significant event, the Compliance Officer (CO) must ensure that the Compliance Committee and the Board are immediately informed of all matters that are potentially reportable to the Regulator and/or require the attention of the Compliance Committee and Board, including but not limited to:

• Any actual or suspected significant adverse event(s) • An incident that has had, or is likely to have, individually or collectively with other

breaches, a material adverse effect on members' interests or a material effect on the operations of the Licensee (ASIC Regulatory Guide 104).

The responsible officer in charge of the function where the significant event has occurred completes an Event Report. The Event Report is provided to the CO who monitors progress and keeps the Board and Compliance Committee informed.

The CO ensures the matter is recorded in the Events and Breaches Register.

Notification to Fund Members

The Responsible Entity has a duty of care to maintain continuous disclosure to members and to notify them of any material changes or significant events that may adversely affect their interests in the fund and/or affect their investment decisions.


Page 12

Notification may precede an investigation and confirmation of the event. The CO will be responsible for investigating all reported adverse events (including potential breaches of the law).

The Responsible Entity has a duty to notify fund investors of material changes or significant events. It is possible that a material change or significant event will not be a breach of the financial services laws and therefore not be covered by the general obligation to report breaches to the ASIC.

Significant events that are not otherwise breaches of the law that need to be reported to investors might include:

• Appointment of a receiver, manager, liquidator or administrator to the Responsible Entity

• An event or change which could have a definitive effect on the future prospects of market values

• A major decrease or increase in the value of scheme property • Substantial increased liabilities of the Responsible Entity as trustee of the scheme • A change in control of the Responsible Entity • An acquisition of significant assets • A large asset re-evaluation • Some systemic issues (i.e. identification of poor disclosure or communications,

administrative or technical errors, product flaws and improper interpretation or application of standard terms might adversely affect members' interests)

• Major changes in the prospects of the company

No compliance breaches have occurred.

2.10 Detail the process for external audit/compliance reviews (e.g. unit pricing, valuation,

allocation of trades).

Smarter Money Funds, Unit Pricing Review Process:

Verify Market Closing Price of Each Security within Portfolio

Reconcile the market closing prices for each security listed on the FundBPO Valuation Report with the Bloomberg closing price on the unit price valuation date.

Reconcile GAV • Adjusted the Gross Asset Value (GAV) on the FundBPO Unit Price Report for cash holdings, receivables and outstanding settlements.

• Check Total Portfolio Value on FundBPO Valuation Report reconciles with the adjusted GAV on the FundBPO Unit Price Report.

Verify any Outstanding Dividend Entitlements inc. Record Date and Payment Date

Check dividend entitlements on the FundBPO Outstanding Settlements Report.

Add back GST Credits to be Claimed

Add back GST credits to be claimed from the FundBPO GST Unclaimed Report.


Page 13

Check Outstanding Trades Check the total outstanding trades with the Investment Team internal records.

Check Cash Balance and interest • Check FundBPO Bank Account Statement with the FundBPO manual cash reconciliation report.

• Check FundBPO cash balance with UBS Daily Cash Report.

• Do a reasonability check on interest total. Check Management Fees Calculate management fees for the period based on daily

rate. Adjust for RITC (1.025). Check Units on Issue Check last unit price periods units on issue confirms with

opening balance. Manager Approval of Valuations Forward portfolio valuation and Outstanding Settlements

report to Manager for review and approval. Confirmation of Unit Price with FundBPO

CEO confirms with FundBPO the unit price has been checked and to process applications and redemptions for the period.

File Reports / Email Correspondence

• CEO saves final FundBPO Valuation, Outstanding Settlements and Unit Price Report at: [directory]

• Email correspondence related to a unit price reconciliation is moved to [directory]

Where there is a trade order that conflicts with other trade orders and it involves a client mandate, the broker will buy/sell and then split the order at the end of the trading day on a pro rata basis based upon the dollar size of the respective orders of all funds/mandates participating in that purchase/sale at the start of the day (subject to any maximum quantity that was specified) and will allocate the same average price for all orders (provided orders were placed either before the market opened or at the same time during the day).

Where there are transfers of listed assets between Smarter Money Investment’s internally managed funds and/or client mandates, this must be done on an arms-length, independent basis with the applicable price being the mid-point of the prevailing buy/sell spread for that security at the time the transaction is to occur.

2.11 Outline your risk management approach or philosophy. Describe how risk is managed within your organisation; include your approach to legal, operational, reputational and business risks. • Smarter Money Investments Pty Ltd (SMI) has a five-tiered approach to risk

management: 1. SMI Risk Controls: SMI's Board determines and regularly reviews the

detailed "Investment and Governance Mandate" for each trust, which prescribes all hard and soft (ie, target) portfolio construction and investment rules for SMI's funds;

2. Portfolio Management Team Risk Analysis: SMI's portfolio management team implements the Investment and Governance Mandate for each fund and regularly reports on the portfolio performance. SMI's portfolio management team has built customised risk monitoring systems that independently check trade compliance and calculates on a daily basis the


Page 14

fund's values, duration, modified duration, unit prices, historical returns, historical risk, and runs scenario analyses around shocks to interest rates and credit spreads and their impact on the fund's value;

3. Independent Responsible Entity Risk Oversight: SMI has appointed an independent, third-party Responsible Entity, OneVue RE Services Limited (RE), which has over $2.6 billion under administration and maintains an independent compliance committee. The RE monitors all of the fund transactions on a daily basis and has negative control rights over any fund investments that do not comply with the fund's Product Disclosure Statement. The RE also manages a Risk Management Check-list that monitors the compliance of each transaction with the fund's Investment and Governance Mandate. The RE's independent compliance committee oversees SMI's compliance with its Product Disclosure Statement. Finally, the RE reviews all daily valuation and transactional reports produced by the Fund Administrator and Custodian (see below). The RE is a professional Responsible Entity service provider to a number of funds management organisations, including Clime Investment Management and Select Investment Partners;

4. Independent Yellow Brick Road (YBR) Risk Oversight: SMI's shareholder, the ASX listed Yellow Brick Road Holdings, runs a fourth tier of risk oversight monitoring cash movements and reviewing all daily valuation and transactional reports produced by the Fund Administrator and Custodian. YBR also has a copy of the customised risk monitoring system which they can operate in order to independently review and stress the portfolios;

5. Independent Fund Administrator and Custodial Valuation, Unit Pricing, Transaction, and Performance Reporting: SMI has appointed an independent Fund Administrator, MainstreamBPO (also called FundBPO), which produces independently calculated daily unit prices, monthly and quarterly performance reports, and transaction management services. SMI has also appointed an independent Fund Custodian, BNP Paribas, to provide custodial services for all bond holdings. The Fund Administrator provides YBR, SMI, and the RE with daily reports on all fund transactions and valuations. MainstreamBPO is a professional Fund Administrator for many funds management organisations with in excess of $35 billion in funds under management.

2.12 Please provide a Derivative Risk Statement if available.

• Please see separate document attached.

2.13 Does the firm use quantitative risk management tools? Please describe. • Yes, SMI has developed its own internal risk management systems in Visual Basic

that provide, on a daily or intra-day basis, pre-trade compliance analysis, unit pricing, risk and return analytics, individual asset valuation, time to maturity and modified duration statistics, and value-at-risk scenario analyses that shock the portfolio’s assets via changes in interest rates and credit spreads.

• SMI’s Fund Administrator for its unitised managed fund also operates the “HiPortfolio” fund accounting system. HiPortfolio is a complete fund accounting solution delivering trade and investment cycle functionality in an integrated environment. Multi-currency and multi-lingual, it has been chosen by third-party administrators and asset managers in more than 35 countries. All rely on its power, speed and sophistication to manage mission-critical functions.


Page 15

2.14 Please describe your approach to managing liquidity. • Smarter Money Funds: The funds maintain a target range of all of their assets in cash

securities and Australian dollar floating-rate bonds, some of which are eligible for repurchase under the Reserve Bank of Australia’s liquidity facilities. Each fund has its own liquidity targets according to its Investment & Governance Mandate that are consistent with the ability to provide investors with daily (t+3) liquidity during normal market conditions. The funds have access to the RBA’s liquidity facilities via an agreement with YBR Investment Services, which is an official Eligible Counterparty with the RBA and member of the ASX-owned bond settlement platform, Austraclear. This arrangement is unique in the Australian funds management market. All other fund assets are invested in liquid floating-rate securities.

2.15 Please describe how you manage hedging risk if applicable. • Smarter Money Funds:

o Not applicable as all investments are denominated in AUD, o The funds minimise interest rate risk by not investing in any fixed-rate bonds with

significant terms, and investing all the funds’ assets in cash securities and Australian-issued, floating-rate bonds (and where permitted listed hybrid securities). This means that the fund effectively has little-to-no traditional “duration” risk, which is why fund volatility is low. The fund minimises credit risk by maintaining a target weighted-average S&P credit-rating across its portfolio of assets.

2.16 Detail the back office and front office separation policy. Are they independent? • Smarter Money Funds: All front-office investment decisions are undertaken by SMI.

All back-office settlements, transaction management, custodial services, unit pricing and risk and return reporting are provided by FundBPO, OneVue RE Services Limited, and BNP Paribas.

2.17 Does the Board approve and review the operational risk management framework? • Yes, SMI’s Board sets the Investment and Governance Mandates with which each

fund must comply, including all operational risk matters. This is supplemented by OneVue RE Services Limited’s independent Responsible Entity functions.

2.18 Who is responsible for implementing the operational risk management framework? What are the lines of responsibility across senior staff?

• SMI’s two portfolio managers implement the operational risk management framework. Separately, Ed Teh oversees the operational risk and reports to Yellow Brick Road in his role as company secretary. Independently, the RE is also responsible for ensuring that the investment execution complies with the investment mandate at all times.

2.19 Please describe your Disaster Recovery Plan with regards to computer systems, key staff, backup systems, physical presence.

OPERATING RISKS & MITIGANTS

RISK MITIGANTS

• Power spike or black-out disrupts SMI operating systems

• SMI maintains a Universal Power Source (UPS) to enabled continued operations through black-outs and power surges.


Page 16

• SMI computer systems and databases are stolen or erased

• SMI protects its office with 3-D facial recognition and biometric fingerprint scanners with only Darren Harvey and Christopher Joye permitted access.

• All SMI information and data is backed-up weekly on an independent and secure Yellow Brick Road data-server located in Mascot, Sydney via FTP upload. This service is managed by Equinix.

• Disruption that incapacitates SMI office, systems and technology capabilities

• SMI personnel have full 24/7 access to secure Yellow Brick Road Holdings Limited 1 Chifley Square site, which is located approximately 5 kilometres from SMI’s Westfield Bondi Junction base site;

• All SMI investments can be adequately executed via telephone in the short-term via SFS and Macquarie Bank;

• Full back-up office should be operating within t+3 hours;

• SMI personnel can remotely use key investment software for any third-party PC, including: o Bloomberg Professional; o Yield Broker Software; o Standard & Poor’s Global Credit Ratings

Portal.

• Portfolio Managers Darren Harvey or Christopher Joye are individually incapacitated.

• SMI’s portfolio strategy is manageable by Harvey or Joye individually in the absence of the other, although such a disruption is highly undesirable and no guarantees can be made that it can be fully mitigated.

• Succession planning in event portfolio managers are unavailable

• SMI’s core portfolio has extremely high-quality credit characteristics across liquid assets. It can, therefore, be managed on a static basis if the Portfolio Managers were both simultaneously incapacitated.

• In the event that both the Portfolio Managers were unavailable, the portfolio could continue to be managed in the short-term by the SMI Board and YBR given its characteristics with the assistance of experts like Steve Adamek and Phil Bayley, and with key investment banking partners.

• The Responsible Entity, OneVue RE Services Limited, also has significant direct fixed-income expertise and $2.6bn in FUA, and could provide a transitional management solution.

2.20 How do you analyse and monitor counterparty risk?

http://www.equinix.com/locations/asia-pacific/australia/sydney-data-centers/


Page 17

• All counterparties are subject to detailed credit risk analysis by SMI’s credit analysts. In addition, SMI is a subscriber to Standard & Poor’s Ratings Direct system and regularly liaises with S&P analysts as part of that service. This is further supplemented by detailed credit analysis undertaken by SMI’s parent company prior to agreeing any counterparty analysis. This is generally led by Mr Adrian Bouris, who is a qualified solicitor and expert due diligence analyst.

2.21 What due diligence processes does the company perform prior to the appointment of a contracted service provider? • SMI conducts competitive tender processes prior to the appointment of all third-

party service providers, which involves extensive commercial, legal and technical due diligence on each counterparty’s capabilities. SMI typically uses both internal and external legal advice.

2.22 How does the company manage and monitor service level agreements for service providers if they are in place? • All SLAs have obligations imposed on the parties to the SLA, including service

standards, which are regularly reviewed by the SMI Board.

2.23 How does the company manage conflicts of interest? Attached as a separate Document is Smarter Money Investments’ Conflict of Interests Policy for managing conflicts of interest in connection with its activities. The Policy has been approved by the Board of Directors. This Policy is subject to review on an annual basis, or as otherwise required by law or regulations, or to reflect internal developments affecting our business operations or internal organisation. This Policy is a supplement to Smarter Money Investments’ overall general obligation to act with integrity and fairness, both towards its clients and its counterparties, and to always act in the best interests of the unit holders in the funds it manages.

2.24 Are there anti-money Laundering (AML) procedures in place? Please provide a brief description of these. • Each investor is subject to AML due diligence, undertaken to verify the prospective

investor’s identity. • This involved either certification of relevant documents by a person who is

authorised to do so, or verification using the GreenID system.


Page 18

3 Custody of Assets


3.2 Explain how assets are held by your organisation. Explain the arrangements for the custody of assets. • Assets are held by a Custodian (BNP Paribas) appointed by the Responsible Entity.

3.3 If assets are held in the name of a nominee company, please state the nature of the security arrangements including name of the custodian, details of any indemnities and details of audit arrangements. What indemnities are given by your organisation concerning the safe keeping of securities? • BNP Paribas acts as custodian for the Fund and all of its assets.

3.4 Detail the insurance carried covering securities held on a client's behalf (e.g. cover, in particular the insurer, type and amount of insurance cover, excess applicable to each event, limitations on amount or frequency of claims and any other relevant aspects of the insurance cover). • The Insurer is Chubb Insurance Company of Australia Limited and the Policy is called

ALPHA by Chubb • Current covers are:

o Professional Indemnity, Limit of Indemnity $5,000,000, Excess: $25,000 per claim

o Directors & Officers, Limit of Indemnity $2,000,000, Excess: $25,000 per claim o Fidelity Guarantee – Crime, Limit of Indemnity $5,000,000, Excess: $25,000 per

claim 3.5 Do you lend securities? If so, what arrangements do you have for fee sharing with

clients? • No

3.6 What custody arrangements would normally be used where a new client does not express a preference for a particular arrangement? • N/A

3.7 Outline your company’s policy with respect to in specie transfers into and out of pooled products. • N/A

3.8 Should a client wish to terminate an agreement, what restrictions apply? Are you prepared to pass over physical securities rather than cash and what is the time delay involved? If necessary, comment separately for the various products and asset classes in your range. • There are no restrictions on withdrawals or redemptions. • Assets would not usually be transferred in specie.

3.9 What due diligence checks are performed on the custodian or any other service provider for your funds management business?


Page 19

• See above on DD undertaken by us. In addition, our Responsible Entity, which has a significant internal legal capacity, carries out independent due diligence of the Custodian and Fund Administrator.


Page 20

4 Customer Service and Administration


4.2 Is any aspect of your registry, unit pricing, custody and other back office operations outsourced? If so, please state the organisations involved and the scope of the outsourcing arrangement(s). • All registry, unit pricing, fund performance measurement and fund administration is

outsourced to FundBPO.

4.3 Have there been any changes to service providers in the last 5 years? Please provide a brief explanation • BNP Paribas has replaced JP Morgan Chase as Custodian as they have more effective

arrangements in placed to hold custody of term deposits, which represent a significant portion of fund assets.

4.4 What is the frequency of pooled fund unit price calculations? If it varies from fund to fund, break down this information by fund group. • Daily

4.5 Are the systems for administration developed in-house or are standard industry products used? • An industry-standard product called HiPortfolio is used by FundBPO. HiPortfolio is a

complete fund accounting solution delivering trade and investment cycle functionality in an integrated environment. Multi-currency and multi-lingual, it has been chosen by third-party administrators and asset managers in more than 35 countries. All rely on its power, speed and sophistication to manage mission-critical functions. HiPortfolio's straight-through process simplifies back office operations and lowers costs. Web services simplify integration with external systems.

4.6 Describe the systems in place to measure price, monitor and report derivative exposures. • The fund has never invested in any derivatives since inception. Macquarie Bank

provides the fund with all derivatives clearing services, including daily reports of all transactions and valuations. These daily reports are to be sent to the Fund Administrator, Responsible Entity and SMI and included in the daily unit pricing carried out by FundBPO.

4.7 Please provide an organisational diagram of the Customer Service Department.


Page 21

4.8 How are customers defined? Are different levels of service provided to different

customer categories? • Customers are defined in 2 categories:

o Retail /Direct

o Platform / Assisted / Wholesale / Institutional

4.9 What forward planning is carried out to handle targeted growth in client numbers? • FundBPO has significant scale capacity • Their existing portfolio includes over 30,000 investors and over 200 funds for 60

investment managers • The business continues to grow at a steady pace over time and has the resource and

system capacity to accommodate this continued growth • All business processes are scalable and replicable

4.10 What technology is used to assist the customer service function? (e.g. automated call analysis, automated logging of times, document imaging and workflow systems, integrated account management systems.) • Both Call Centres Australia (“CCA”) and FundBPO have fully scalable call centres that

incorporate automated call analysis, automated logging of times, document imaging and workflow systems

• CCA technology includes Predictive Dialler, skills-based routing, Interactive voice response (IVR) phone menu design, Digital recording, Database management and security, Fulfilment and printing, Reporting and analysis, Infrastructure and scalability

4.11 What is your client reporting policy including frequency and timeliness? • Confirmation Statement • Transaction Statement (whenever funds are contributed or withdrawn) • Monthly Performance Reports • Quarterly Distribution & Holding Statement • Annual Holding Statement • Annual Tax Statement

4.12 How do you communicate with clients?


Page 22

• All formal reporting is paper-based • Informal communications are via phone and email

4.13 What are your standards regarding the following:

• Number of days to process applications once completed paperwork is received → BPAY or EFT – if received before 12pm, the application will be valued at T+0 → BPAY or EFT – if received after 12pm, the application will be valued at T+1 → Cheque – the application will be valued at T+2. → Direct Debit – the application will be valued at T+3 → Once the daily unit price is calculated (within 24-48 hrs), units are allocated

• Number of days to process redemptions → If a signed redemption request is received before 3pm, it is valued for that date. → Once the daily unit price is calculated (within 24 hrs), the redemption is processed and

funding is requested overnight from the Custodian → The entire process usually takes T+3 business days.

• Number of days to respond verbally to queries or complaints

→ Verbal queries or complaints are responded to within 24 hours. → Queries or complaints via email are responded to within 24 hours. → Queries or complaints via mail are sent a written response within 24 hours.

4.14 Please provide brief details of how client services personnel are provided with a required level of product and investment knowledge (i.e. induction and training programs, manuals, etc.). • Each team member receives face to face product training from a Product Expert

together, with a detailed training manual, including copies of all marketing and product collateral.

• The Product Experts are in daily contact with customer service personnel to discuss and resolve questions as they arise.

4.15 What training do customer service personnel undertake prior to the launch of a new product? • Each team member receives face to face product training from a Product Expert

together with a detailed training manual, including copies of all marketing and product collateral.

4.16 What information is provided to clients (e.g. technical, economic, investment, performance, and asset allocation)? • On a monthly basis, clients receive:

o Fund return analysis o Fund risk analysis o Key portfolio construction data o Comparative fund performance vs. key benchmarks o Unit pricing and unit valuation

4.17 In terms of service and administration standards:


Page 23

• How does your organisation benchmark itself? o FundBPO benchmarks itself against industry best practice. They are a member of

ACSA and participate in industry working groups, surveys and attend FSC and ACSA conferences.

o FundBPO also works with advisers Ernst and Young to assess achievement of best practice in its GS007 controls review

• How are the service-standards formulated and implemented? o FundBPO implements service standards in consultation with their clients and can

refine these to meet underlying investor requirements particularly from platforms and nominees.

• How is the achievement of service standards monitored? o Services are measured to agreed processes and updated with client consultation

and market requirements. o Exceptions are reviewed against complaints or feedback and updated accordingly.

4.18 Briefly describe your procedures for dealing with complaints. • If you wish to discuss any aspect of the Fund or wish to lodge a complaint please

contact us and we will endeavour to resolve your concerns quickly and fairly. Please send your complaint in writing to the Compliance Manager at OneVue RE Services Limited, PO Box R1999, Royal Exchange NSW 1225. We will confirm receipt of your complaint within 7 Business Days.

• If you have not received a satisfactory response or 45 days have elapsed, you may refer the matter to the Financial Ombudsman Service Limited (FOS):Telephone 1300 780 808 (free call from Australia), or by email at [email protected] or in writing to Financial Ombudsman Service, GPO Box 3, Melbourne, VIC 3001, Australia.

• FOS is an independent body and is approved by ASIC to consider complaints. In order for a complaint to be considered by FOS, the claim must be less than $500,000 (unless the Responsible Entity and you agree otherwise in writing). Note: FOS is only able to make a determination of up to $280,000 per claim (excluding compensation for costs and interest payments).

• If you are investing through a master trust or wrap account then enquiries and complaints should be directed to the operator of that service, and not to the Responsible Entity.

4.19 What level of interaction exists between customer service and the investment management team?

• The Product Managers are in daily interaction with the portfolio management team and liaises daily with the customer service team.


Page 24

SECTION 2 – INVESTMENT INFORMATION


Page 25

5 Investment Philosophy (Firm-Wide)

5.1 State the name of the INVESTMENT person responsible for the content of this Section. Please provide the following:

• Name: Christopher Joye. Email: [email protected] 5.2 Describe your broad investment philosophy. This should not limit the statement to

different philosophies or sub-philosophies which may be driving any individual product, as articulated in a later section of this document. What evidence do you have to support this philosophy?

• Smarter Money Investments' philosophy is motivated by six key insights:

1. Cash and fixed-income's risk-adjusted diversification: On the basis of return targets of CPI plus 3-4% per annum and extensive empirical mean-variance optimisation analysis, we believe Australian savers' asset-allocation decisions have historically resulted in them taking on unnecessarily high exposures to equities, including listed Australian and global equities, unlisted commercial property equities, and private equity. At the same time, savers have historically had insufficiently high portfolio weights to cash securities, floating-rate notes, and fixed-rate bonds, which have offered relatively attractive risk-adjusted returns. We are, therefore, motivated to liberate superior and aligned cash and fixed-income opportunities for multi-asset-class savers.

2. Cash is a powerful inflation hedge: We believe that with a central bank that has a formal “inflation-targeting” mandate (as documented under the Statement on the Conduct of Monetary Policy), Australian cash securities and floating-rate notes have delivered attractive “real” or inflation-adjusted returns. Specifically, the RBA cash rate has had a high, circa 70% correlation with core inflation since 1990, which is what one would expect. The RBA cash rate plus 1% per annum has yielded strong real, inflation-adjusted returns of approximately 4% per annum since 1990 (see charts).

mailto:[email protected]


Page 26

3. Long-term interest rate duration is a major source of risk: We believe that there is a role in diversified portfolios for fixed-income strategies with little interest rate/duration risk (ie, primarily invested in floating-rate assets). Duration is the source of the vast majority of fixed-income volatility and the risk of capital loss (see charts below). We think floating-rate assets can provide strong inflation and deflation hedges, and historically carry much lower volatility. Empirical research shows that economists, the futures market and even the RBA itself cannot forecast interest rate movements accurately beyond 6-12 months. Yet most fixed-income portfolios take years of duration risk. The average interest rate duration in the UBS Composite Bond Index is over 4 years. While long-term duration can serve as a useful equities hedge, it is not something in isolation that we believe should be internalised in portfolios.

4. Inefficient asset-classes: We believe that there are inherent unexploited inefficiencies in the Australian cash and fixed-income markets due to: (1) weak economic incentives in the form of very low fees encouraging very passive investment styles and a paucity of active investment management (and top human talent), which means asset pricing is not as efficient as it


Page 27

should be; and (2) opaque price discovery as a function of the fact that wholesale bonds settled through the ASX-owned Austraclear do not require prices to be publicly disclosed, which means that rapid information flows are thwarted. This again opens up opportunities for nimble active managers to exploit these discrepancies.

5. Short-term duration exploitation: While we are convinced that long-term duration is impossible to predict, we believe that the interest rate-related financial markets do present systematically attractive short-term opportunities to exploit pricing inefficiencies around major macroeconomic events, such as RBA cash rate decisions, and the release of tier-one economic data like inflation, unemployment, and GDP.

6. Active asset-allocation between cash and credit: We believe that active managers can add considerable value by dynamically adjusting portfolios for relative value opportunities between cash and floating-rate notes, which is borne out by our portfolios’ highly contrarian asset-allocation across cash and FRNs and the superior returns that this has furnished.

We believe that combining the six abovementioned insights can produce uncorrelated cash and short-term fixed-income portfolio strategies that offer robust inflation-adjusted returns with very low risk.

The chart below shows the rolling quarterly performance of a portfolio comprised 50:50 of bank bills and floating rate notes (UBS Bank Bill Index and UBS Floating Rate Note Index) during the Global Financial Crisis and Euro Crisis, through until late 2014. There were no periods of negative performance. In fact, the worst rolling 90 day return is +0.18%.

5.3 Please describe your approach to tax management. Do you report after tax returns? • The Smarter Money Funds are fully distributing unit trusts that distributes all capital

and income on a pre-tax basis to unit holders

5.4 Have you committed to formalising the integration of ESG considerations in your investment process either by becoming a signatory to the UNPRI or developing a publically available responsible investment/ESG policy?

• No


Page 28

5.5 Do you report on your progress in integrating ESG considerations publically or to clients? • No


Page 29

6 Australian Fixed Interest

6.1 State the name of the INVESTMENT person responsible for the content of this Section. Please provide the following:

• Chistopher Joye, [email protected] 6.2 Please describe how the investment team responsible for this asset class is structured.

Please include a reference to back-up procedures and ultimate investment responsibility. • The team comprises two dedicated portfolio managers (Harvey and Joye) with joint

responsibility for the fund, which are supported by four credit analysts (Teh, McLachlan, Adamek, Bayley), a risk consultant (Palfi) and a quantitative analyst (Wang), product management and business development resources (Morton, Walsh, Vallelonga and Winston Capital). See attached bios.

• The two portfolio managers (PMs) report to the SMI investment committee, which is also the SMI board. There are two non-executive members of the SMI board. Disaster recovery protocols have also been established (see table below).

• Risk management is divided up into internal and external components. Internal: o Detailed Investment & Governance Mandate controls what PMs can/cannot do:

Prescribes ‘core universe’;

Monitored by SMI Investment Committee with 2x Independent Members

o Custom-designed internal risk management systems provides PMs with:

Proprietary bond valuation and bond rating estimates;

Pre-trade compliance system to ensure proposed trade is within the investment mandate;

Detailed portfolio composition statistics across all relevant investment parameters;

The ability to shock portfolio with specific new investments;

Independent theoretical (non-market) pricing for all assets;

Daily stress-testing of all assets and overall portfolio to:

• Credit spread shock equivalent to GFC and Euro crises;

• Other scenario analysis;

• Yield curve changes. • External:

o The independent Responsible Entity (RE), monitors compliance with all Investment Mandates:

Meets quarterly;

Independent RE Board;

o Yellow Brick Road manages an independent risk evaluation system that oversees each fund’s risk, which is mirror of the internal risk models, and monitors compliance with mandates;

o All Fund assets are independently valued (daily) by the external Fund Administrator, FundBPO;

o All unit pricing is independently measured by FundBPO on daily basis;

mailto:[email protected]


Page 30

o BNP Paribas is the external custodian with direct reporting to RE.

6.3 Describe the investment philosophy that underlies this particular strategy including references to market inefficiencies you aim to exploit. What evidence do you have to support this approach to investing? Please be concise and do not use any marketing embellishment.

Smarter Money Fund (active cash strategy) • The Smarter Money Fund (SMAC) has an “active cash” or “short-term fixed-interest”

strategy that involves investing in Australian cash and investment-grade floating-rate note securities, which targets returns that outperform the RBA cash rate by 1% - 2% per annum after all fees, over a rolling 12 month period, with very low volatility. It achieves this by applying bottom up and top down active asset-selection of qualifying, Australian dollar denominated, Australian-issued bank deposits and investment-grade floating rate bonds.

• SMAC has a track-record of low volatility outperformance against benchmarks. The charts immediately below provide some asset-allocation, benchmarking, and portfolio composition analysis, which can be discussed with the manager in more detail on request.

• The key drivers of SMAC’s performance are (1) high conviction asset-selection in Aussie bank FRNs focussing on mispriced parts of the capital structure; (2) sharp changes in asset-allocation between Aussie cash and Aussie FRNs that correctly anticipated striking changes in credit pricing over 2015; and (3) continued excess returns on SMAC’s deposit portfolio.


Page 31

• Other key features of the Smarter Money Active Cash Fund strategy include:

o No interest rate/duration risk: The fund carries virtually no interest rate or duration risk given it only invests in floating-rate instruments and cash with less than 12 months to maturity.

o Conservatism: The fund cannot invest in hybrids, equities, sub-investment grade debt, unrated debt, foreign-issued bonds, related-party securities and targets a weighted-average credit rating of A+ to A-, with 30-50% in cash and RBA repo eligible assets. The majority of its capital is invested in institutional bank deposits, term deposits and bank bonds (see table below).

o Manager Co-investment: The fund manager and its shareholders are a significant direct co-investor in the fund, which provides a clear alignment of interests.

o Liquidity Protection: The fund will target holding 30-50% of its investments in cash or investment grade bonds that are eligible for exchange with the RBA, and can access the RBA’s liquidity facilities. This will assist the fund in meeting abnormal redemption requests in a situation where the liquidity of the Australian financial system is subject to extreme pressure.

o No Penalties for Early Withdrawal: The fund will not penalise you if you wish to withdraw your money. Under some term deposits, you can lose up to 90% of your interest if you try to withdraw your money prior to the term expiring.

o Convenient Access: The fund allows investors to make daily requests for withdrawals from the fund.

Smarter Money Higher Income • Smarter Money Higher Income (SMHI) is an investment solution that targets returns

that outperform the Reserve Bank of Australia’s cash rate by 1.5% - 3% per annum after all fees, over rolling 12 month periods. SMHI invests in a portfolio of Australian deposits, Australian investment-grade bonds (mainly issued by banks) and hybrids issued by banks and companies. The fund was created in October 2014 and its benchmark is the RBA cash rate plus 1.5% per annum after fees.

• SMHI was designed for an existing institutional investor in SMAC that wanted a purer portfolio exposure to both Australian floating-rate notes and Smarter Money Investments’ active asset-selection skills. SMHI is therefore a more active Australian fixed-interest strategy. Since its public launch SMHI has proven popular with investors seeking attractive ‘real’ returns with minimal fixed-rate duration risks. Like SMAC, SMHI


Page 32

was developed to deliver strong absolute returns in both rising and falling interest rate climates. SMHI is prevented from investing in:

o No foreign issued bonds o No currency risks o No leverage o No fixed-rate bonds with terms longer than 24 months o No related-party securities

• SMHI targets holding 80-90% of its investments in Australian dollar-denominated and issued, floating-rate notes and hybrid securities with the balance invested in Australian deposits with APRA-regulated ADIs. The target weighted-average Standard & Poor's credit rating (excluding ADI deposits) is "investment grade" (BBB).

6.4 State briefly the competitive advantage that underlies this strategy. • The comparative advantage of both Funds is four-fold:


Page 33

o The funds are highly active in their asset-selection and absolute return focussed in comparison to other cash and fixed-income peers that are much more passive and index (or relative return) orientated with correspondingly lower returns;

o They have an unusually telescoped and disciplined investment mandate that restricts them to floating-rate and Australian-issued debt securities in contrast to competitors that invest in overseas and fixed-rate bonds with substantial interest rate/duration risk. SMAC is also limited to investment-grade assets;

o The portfolio management team comprises one of Australia’s most successful fixed-income traders with 25 years’ experience with one of the nation’s leading macro-economists and banking analysts. The fund also has three outstanding credit analysts with a proven track-record over multiple decades;

o The funds have, uniquely, secured access to the RBA’s liquidity facilities in the event that they need to quickly dispose of assets in an emergency.

o We believe that the investment approach is a sustainable alpha generator, The alpha sources include: Superior deposit interest rates versus a passive deposit benchmark

(driven through either superior negotiated rates and/or excess deposit returns through optimal short-term duration decisions vis-à-vis the yield curve embedded in deposits);

Superior bond selection that generates superior interest rates versus some bond benchmark (eg, the FRN index) while noting that there is likely a credit risk premium driving this notwithstanding that we cannot actually take that much credit risk (ie, we have to keep the weighted-average credit rating between A+ and A- and cannot invest in sub-investment grade bonds);

Superior bond capital (as opposed to income) returns based on changes in the value of those bonds through acquiring bonds that are mispriced or undervalued; and

Superior asset-allocation within the portfolio between deposits and bonds such that our overall total returns after fees outperform a passive benchmark.

6.5 Please complete the following information for your flagship product in this strategy:

Smarter Money Active Cash

Product

name

Bench-mark

Inception

date

Target return

objective

Target TE (volatility)

range

FUM

Time frame

Performance calculated

gross or net

Smarter Money Active Cash Fund

RBA Official Target Cash Rate

17 February

2012

Outperform the RBA’s official

target cash rate by 1% - 2% p.a.

after fees over a rolling 12

month period

Target volatility of

less than 1% p.a.

$241m 46 months Net

Smarter Money Higher Income

Product name

Bench-mark

Inception

date

Target return

objective

Target TE (volatility)

range

FUM

Time frame

Performance calculated

gross or net Smarter RBA October Outperform the Target $83m 15 Net


Page 34

Money Higher Income

Fund

Official Target Cash Rate

2014 RBA’s official target cash rate

by 1.5% - 3% p.a. after fees

over a rolling 12 month period

volatility of less than 2% p.a.

months

6.6 Explain your investment process (use a diagram if appropriate). Please be concise. • All investments must first comply with the fund’s very restrictive Investment &

Governance Mandate. This prescribes what types of assets are and are not eligible for the portfolio, including parameters such as credit rating, bond type, industry type, etc.

• Qualifying assets must be subject to detailed independent analysis by one of the fund’s credit analysts, which results in a positive credit recommendation.

• Upon receiving a positive recommendation, the asset must then be approved by both of the fund’s portfolio managers on the basis of its valuation being equal to or less than fair market value and consistent with the fund’s risk and return requirements at that time. Prior to this occurring, a macroeconomic analysis will also be carried out.

• All acquired assets are reviewed on a daily basis for their suitability in the fund’s portfolio.

• Key investment criteria include:

o Credit quality; o Duration risk; o Credit spread risk. o Macro-economic risks;


Page 35

o Portfolio diversification; o Valuation.

6.7 Describe any enhancements that have been made to your process over the last year. • Since inception the fund has been more conservatively managed in terms of cash

allocations and credit ratings than the original mandate implied; • Since inception there has been more active bond trading than was originally expected

due to arbitrage opportunities; • Since inception of the fund the portfolio management team has built its own

customised risk management systems, including bond valuation and bond rating systems, to monitor the risk and return performance of, and value, all the individual assets in the portfolio, on a daily basis.

6.8 What are your sources of value add? Please use the table below to illustrate where out-performance is expected to come from.

Source of Value Add %

Fundamental security analysis 33%

Macro-economic security analysis 33%

Portfolio construction 33%

Total 100%

6.9 Please outline your research and screening process. • Key research and screening criteria include:

o Currency;

o Country of issue;

o Type and legal terms of security;

o Position in the capital structure;

o Term to maturity;

o Trading margin as compensation for risk;

o Industry type;

o Idiosyncratic credit risks;

o Industry beta risks;

o Overarching macro-economic and political analysis;

o Model valuation;

o Market valuation;

o Correlations with other assets in the portfolio.

6.10 Please outline how portfolios are constructed. Smarter Money Fund

• SMAC’s Investment & Governance Mandate imposes significant restrictions on portfolio construction. The conceptual portfolio construction principles are as follows:

o SMAC should have a target weight to pure cash and RBA repo-eligible securities of 30% to maximise liquidity;

o SMAC should, where appropriate, maximise cash, or cash substitute exposures;


Page 36

o SMAC should hold little to no traditional fixed-rate duration risk;

o SMAC should have a weighted-average credit rating that is comparable to a mid-size Australian bank with the benefit of diversification across banks;

o SMAC should have a weighted-average time to maturity of less than 1,000 days;

o SMAC should, where possible, maximise diversification;

o SMAC should carry primarily Australian macroeconomic risks, given that domain represents our information comparative advantage;

o SMAC should hold a collection of securities that generate the best possible risk-adjusted returns given the fund’s benchmark.

6.11 Define the authorised universe of the strategy. What is your investment approach to securities that are not included in the index?

Smarter Money Fund (Active Cash) Unrated debt 0% Debt not listed on Austraclear or ASX or Australian-dollar securities governed under Australian law, settled via Euroclear. 0%

Sub-investment grade debt at purchase 0%

Foreign denominated debt 0%

Australian or global shares (excluding ASX listed bonds) 0%

Long-term fixed-rate bonds (>12mths), unless swapped to floating with AA- rated counterparty 0%

Collateralised debt obligations 0%

Issues sizes less than $50m 0%

Inflation-linked bonds 0%

Gearing the Fund No, unless using RBA liquidity facilities

Hybrids with significant equity risks, as determined by the Investment Committee 0%

Non-prime mortgages 0%

Investment in or funding of YBR-issued securities or YBR-issued loans 0%

Target weight to at-call bank deposits with APRA-regulated ADI 0% to 10%

Target weight to at-call deposits and term deposits with APRA-regulated ADI with maturities less than 12 months 20%

Target weight to at-call deposits and term deposits with APRA-regulated ADI with maturities less than 12 months plus RBA repo-eligible floating-rate notes 30%

Minimum exposure to cash instruments 10%

Maximum target weight to credit unions/building societies in deposit portfolio 15%

Maximum target weight to foreign-owned subsidiary banks regulated by APRA in deposit portfolio 30%

Maximum target weight to deposits with issuers with short-term S&P (or Moodys where S&P not available) credit ratings of less than A-2 30%

Maximum target weight to Term Deposits 25%

Target weight to investment grade, Australian dollar-denominated and issued, floating rate notes 80%

Maximum exposure to investment-grade debt securities 90%


Page 37

Minimum (target) number of floating rate note issues 5 (30) issues

Maximum (target) exposure to any one issuer at origination, excluding ADI deposits 33% (10%)

Maximum (target) exposure to any one asset at origination, excluding ADI deposits 33% (5%) of portfolio value

Target weighted-average S&P credit rating (or Moodys where S&P not available), excluding ADI bank deposits A+ to A-

Target exposure to securities with long-term credit rating assessed by S&P of A- or better (or Moodys where S&P not available) 50%

Minimum credit rating for all securities, excluding ADI deposits BBB- or better (or equivalent as assessed by other recognised ratings agencies). In case of variations, lowest rating used

Maximum (target) weighted-average time to maturity 1,500 days (less than 1,000 days)

Maximum portfolio weight to RMBS

25% in total (15% with a rating of AA- or better (or rating equivalent) and a further 10% of the portfolio with a rating of AAA and repo-eligible)

Smarter Money Higher Income Unrated debt 10%

Debt not listed on Austraclear or ASX 0%

Sub-investment grade debt at purchase 0%

Foreign denominated debt 0%

Australian or global shares (excluding ASX listed bonds) 0%

Long-term fixed-rate bonds (>12mths), unless swapped to floating with AA- rated counterparty n/a

Collateralised debt obligations 0%

Issues sizes less than $50m 0%

Inflation-linked bonds 0%

Gearing the Fund No, unless using RBA liquidity facilities

ASX Hybrids 15%

Non-prime mortgages 0%

Investment in or funding of YBR-issued securities or YBR-issued loans 0%

Target weight to at-call bank deposits with APRA-regulated ADI 0% to 10%

Target weight to at-call deposits and term deposits with APRA-regulated ADI with maturities less than 12 months 10% to 20%

Target weight to at-call deposits and term deposits with APRA-regulated ADI with maturities less than 12 months plus RBA repo-eligible floating-rate notes 20%

Minimum exposure to cash instruments 5%

Maximum target weight to credit unions/building societies in deposit portfolio 15%

Maximum target weight to foreign-owned subsidiary banks regulated by APRA in deposit portfolio Na

Maximum target weight to deposits with issuers with short-term S&P (or Moodys where S&P not available) credit ratings of less than A-2 Na

Target weight to investment grade, Australian dollar-denominated and issued, floating rate notes 90%

Maximum exposure to investment-grade debt securities Na


Page 38

Minimum (target) number of floating rate note issues 5 (30) issues

Maximum (target) exposure to any one issuer at origination, excluding ADI deposits 33% (10%)

Maximum (target) exposure to any one asset at origination, excluding ADI deposits 33% (5%) of portfolio value

Target weighted-average S&P credit rating (or Moodys where S&P not available), excluding ADI bank deposits BBB

Target exposure to securities with long-term credit rating assessed by S&P of A- or better (or Moodys where S&P not available) Na

Minimum credit rating for all securities, excluding ADI deposits Na

Maximum (target) weighted-average time to maturity 3,000 days (less than 2,000 days)

Maximum portfolio weight to RMBS 33% in total

6.12 Describe the investment risks of the portfolio? Summarise in table format the risk

management parameters for the flagship strategy.

See above.

6.13 Describe the methodology you employ to identify, capture, assess and monitor operational risks.

Operating risks are reviewed and mitigated by all key fund stakeholders, including SMI, OneVue RE Services Limited, FundBPO, BNP Paribas, and Yellow Brick Road Holdings.

6.14 Describe the pre and post trade mandate compliance process.

Smarter Money Investments has a proprietary pre-trade compliance software system (a visual basic module) that is an extension of the risk management system already in daily use by the portfolio managers of SMI. The core risk management system, which was developed by Smarter Money Investments’ risk consultant, Alex Palfi, prior to the fund’s launch focussed on the valuation of the individual assets and the portfolio and stress-testing the individual assets and the overall portfolio to changes in credit spreads and modified duration.

The pre-trade compliance system does the following:

• All prospective investments must be inputted into the system according to the updated

Investment & Governance Mandate; • The system then evaluates the prospective investment against a long list of the

acceptable criteria that are specified by the Investment & Governance Mandate, including, but not limited to: o Whether the investment:

Is a fixed-rate bond; Is sub-investment grade; Is RMBS; Is a hybrid; Is equities; Is a YBR issued security;

o The investment’s impact on the fund’s: Target weight to cash; Target weight to bonds;


Page 39

Target credit rating; Target time to maturity; Weighted-average yield; Minimum issue size; Minimum number of issues; Maximum portfolio weight to issue, and so on.

• If and only if the pre-trade compliance system verifies that the investment is compliant can the portfolio management team proceed with the investment;

• All prospective investment evaluations carried out by the system result in an email output summarising the compliance test results, which is emailed automatically to the Responsible Entity and to YBR financial control to ensure there is independent oversight over and above the portfolio managers.

TRANSACTION VERIFICATION PROCESS Responsibilities: SMI Operations (Ed Teh) and OneVue RE Services Process Pre-trade The Investment Team checks that the security is within the Investment Mandate as part of their approval process using the pre-trade compliance system and send a copy of the report to the Financial Control team and to the Fund's RE. Pre-settlement Trade ticket sent to Operations Transaction Verification Process undertaken by Operations Review the pre-trade compliance report Check that the trade matches the details in the pre-trade report If approved, the trade file is sent to FundBPO for settlement with a copy to the RE Governance review by RE on a spot-check basis If RE has a query, they notify Operations for further review and response to RE If transaction is rejected by Operations, email sent to Investment Team and RE Sell transaction to reverse trade to be undertaken within T+1

The fund’s Responsible Entity can initiate or require Smarter Money Investments to initiate a sell transaction in the timeframe that the RE determines, in order to reverse a trade that is outside the fund’s Investment and Governance Mandate.

6.15 Outline the trading/execution process.

• One of the portfolio managers communicates an order to one of the fund’s brokers, and the transaction is consummated as described above.

6.16 Please explain how you use derivatives in managing this strategy. Who is responsible for managing and implementing derivatives strategies?

• Derivatives are used to minimise exposures to interest rate risk (ie, for hedging purposes) and/or profit from perceived macro-economic risks. The fund can only buy derivatives, and cannot sell them unless the transaction in question is fully hedged.

• Derivatives are not used to gear the fund. When derivatives are used, the fund must be in a position to pay all of the associated obligations from the investments of the fund. To reduce the risks of leverage, the fund will ensure that short derivatives positions are backed by a matched amount of similar physical assets and long derivatives positions will be backed by a matched amount of liquid assets such as cash or cash equivalents.


Page 40

6.17 Detail your process for selecting, monitoring, and assessing counter-party performance. • All counterparties must be APRA regulated Australian institutions and/or have high

Standard & Poor’s credit ratings. Performance is typically monitored via pre-determined service level agreements. The status of all these variables is regularly reviewed. In house, and, where appropriate, external, legal also carry out due diligence, as appropriate.

6.18 Describe the procedures used to ensure consistency of performance across portfolios with similar objectives.

• N/A

6.19 Please describe how you integrate your consideration of ESG issues in your investment decision making: please include information on ESG research and its role in the investment process.

• N/A

6.20 Do responsible investment practices form any part of investment managers’ goals/incentives/remuneration? If yes, please provide brief details.

• No

6.21 Do you have any additional resources outside the investment team with specific ESG related responsibilities or incentives? If yes, please provide brief details.

• No

6.22 Do you identify and prioritise ESG issues and set engagement objectives and if so, how?

• No


Page 41

7 Investment Performance

7.1 State the name of the person responsible for the content of this section. Please provide the following: • Rob Morton

• [email protected]

• www.smitrust.com.au

7.2 To what extent does the organisation comply with industry standards (e.g. FSC and GIPS)? • All performance data is independently calculated by the fund’s administrator, FundBPO

in accordance with industry best practice. • FundBPO adopts AIPS Standard previously known as the IFSA Guidance Note 1

7.3 Please describe the frequency and extent to which performance data is audited, both internally and externally.

• Unit pricing is calculated independently by FundBPO on a daily basis. Performance estimates are recorded on both a monthly and quarterly basis. All return calculations are independent carried out by FundBPO in accordance with industry best practice.

7.4 Do any of your strategies/products have performance fees? If so, please explain how they are calculated (e.g. hurdle rates, high watermarks).

Smarter Money Active Cash Fund: For any Investor, the Performance Fee of the Fund will be 20.5% on any amount by which the Fund outperforms its Investment Objective (i.e. the RBA’s official target cash rate plus 1% per annum in a calendar month after deducting the Fund’s Management Costs (excluding the Performance Fee) and ordinary expenses). This is subject to a High Watermark which is that the Fund performance (calculated as the cumulative return of the Fund, including distributions but before performance fees, since inception) must be higher than any previously achieved cumulative monthly performance level. • In respect of any period (the “Relevant Period”) the Performance Fee will be payable

calculated as follows:

o 0.205 x (Return 1 – (Return 2 + (Return 2 x BR)))

where

o Return 1 = the value of the net assets of the Fund at the end of the Relevant Period;

o Return 2 = the value of the net assets of the Fund at the end of the immediately preceding Relevant Period; and

o BR = an interest rate equal to the aggregate of the official target cash rate of the RBA as at 9.00 am (Sydney time) on each day of the Relevant Period as published by the RBA plus 1% divided by the number of days in the Relevant Period, which is then converted into a daily interest rate and multiplied by the number of days in the Relevant Period.

• The value of the Fund’s net assets will be adjusted for applications, redemptions and distributions, and will reflect the deduction of all Fund costs including Management Costs.

• The Performance Fee will be accrued daily in the Unit Price and (if payable) will be paid monthly in arrears.


Page 42

Smarter Money High Income Fund: For any Investor, the Performance Fee of the Fund will be 22.5% on any amount by which the Fund outperforms its Investment Objective (i.e. the RBA’s official target cash rate plus 1.5% per annum in a calendar month after deducting the Fund’s Management Costs (excluding the Performance Fee) and ordinary expenses). This is subject to a High Watermark which is that the Fund performance (calculated as the cumulative return of the Fund, including distributions but before performance fees, since inception) must be higher than any previously achieved cumulative monthly performance level.

7.5 Please describe how turnover data is calculated.

• N/A

7.6 Please list your current benchmarks for the asset classes shown below.

Smarter Money Active Cash Fund

Products

Benchmark

Excess Return

Objective

Target Tracking

Error Range

Performance Primarily Assessed over “x”

years

Cash RBA Official Target Cash Rate

1% - 1.5% per annum

after fees

+/- 1% per

annum

Longest period

possible

Fixed Interest RBA Official Target Cash Rate

1.5% - 2% per annum

after fees

+/- 2% per

annum

Longest period

possible

Smarter Money Higher Income Fund

Products

Benchmark

Excess Return

Objective

Target Tracking

Error Range

Performance Primarily Assessed over “x”

years

Cash RBA Official Target Cash Rate

1% - 1.5% per annum

after fees

+/- 1% per

annum

Longest period

possible

Fixed Interest RBA Official Target Cash Rate

1.5% - 3% per annum

after fees

+/- 2% per

annum

Longest period

possible

Income Securities RBA Official Target Cash Rate

1.5% - 3% per annum

after fees

+/- 2% per

annum

Longest period

possible


Page 43

Appendix 1

Investment Team Biographies

Darren Harvey, Executive Director & Portfolio Manager

Darren started his career at McIntosh Hamson Hoare Govett in 1987 in their graduate training program as a junior bond futures adviser and then options adviser. In 1989 he was headhunted to join Fay Richwhite to establish their bond option sales business. In that year he also assumed responsibility for trading interest rate options using Fay Richwhite’s balance-sheet and built a team of interest rate option and share price index traders that included five market-makers in total. Fay Richwhite went from no activity to the No. 1 option market-maker on the Sydney Futures Exchange by volume and reputation. Darren was responsible for all the risk management associated with Fay Richwhite’s exchange-traded derivatives businesses reporting to the Head of Trading. In 1992 Deutsche Bank recruited Darren as an Associate Director and Head of Exchange Traded Options to replicate the market making business he had established inside Fay Richwhite. In 1994 Deutsche Bank promoted Darren to Director and Head of Exchange Traded and OTC Options, which included a team of six market makers reporting to the Head of Trading. During this time Darren was responsible for principal trading off Deutsche Bank’s balance-sheet across multiple asset classes, including equities, currencies, bonds, commodities, and derivatives. Darren was also responsible for risk management and staffing. In 1998 Darren moved to London with Deutsche Bank as a Director of Deutsche Bank Global Proprietary Trading in London where he traded interest rate derivatives, currencies and stock index securities, and reported to the Head of Deutsche Bank Global Proprietary Trading, Steve Kennedy. Darren resigned from Deutsche Bank in 2001 and established his family office, Bower Capital. He was approved as an Independent Member of the Sydney Futures Exchange/Australian Stock Exchange to invest his own money in the interest rate securities markets and received rebates from the exchange as a recognised market-maker. Darren was one of the largest independent interest rate options traders on the SFE/ASX and helped the SFE/ASX design its intraday interest rate option contracts for government bonds. In 2011 Darren co-founded Coolabah Capital Investments Pty Ltd and Smarter Money Investments Pty Ltd, which he serves as an Executive Director, Co-Chief Investment Officer and Portfolio Manager of. Coolabah owns 50% of Smarter Money Investments. In 1987 Darren graduated from the SFE’s Registered Representatives Course. He was Chairman of Sydney Futures Exchange’s Exchange Traded Option Committee between 1993 and 1995, and a Casual Lecturer in Derivatives and Options at Securities Institute of Australia in 1994-1995. Between 1996-1996 he was a member of the Australian Financial Markets Association (AFMA) Over-the-Counter Option Committee. Bower Capital was approved as a recognised market maker and Independent Member of the SFE/ASX between 2001-2008.

Christopher Joye, Executive Director & Portfolio Manager Christopher has 14 years’ experience investing in the fixed-income and asset-back securities markets, working in mergers and acquisitions, innovating patentable research, and advising governments on complex policy matters. He has been a portfolio manager with Smarter Money Investments since its inception in late 2011 focussing on idea generation, trade execution, and research. He also writes regularly for The Australian Financial Review as a Contributing Editor on economics, finance and policy issues. Christopher started his career in mergers and acquisitions (and principal investments) with Goldman Sachs in both London and Sydney. Before studying in the PhD program at Cambridge University (2002-2003) he worked as a senior analyst at the Reserve Bank of Australia focussing on financial markets. In 2003 he was the principal author of


Page 44

a 380 page report commissioned by Prime Minister John Howard to investigate innovative solutions to problems on the demand- and supply-sides of Australia’s housing market. In 2004 he established an award-winning research and funds management business, Rismark International. While working as a portfolio manager at Rismark, Christopher developed advanced analytical and risk management tools that have become key products used by most banks today (eg, the daily RP Data-Rismark “hedonic” house price indices), Australia’s largest financial services patent portfolio, and successfully ran a Mercer-rated, asset-backed securities fund that has delivered significantly positive absolute returns since 2007. After selling a majority of Rismark to a large investment bank in 2010, Christopher established Smarter Money Investments in 2011 to specialise in fixed-income solutions. In 2007 Christopher was selected by BRW Magazine as one of "Australia's Top 10 Innovators". In 2008, the Australian Government embraced, and subsequently invested $20 billion behind, a policy proposal developed by Christopher to provide liquidity to the Australian securitisation market to mitigate the effects of the GFC. This policy has delivered taxpayers over $600 million in realised profits to date. In 2009 Christopher was invited by the Rockefeller and MacArthur Foundations to travel to advise the Obama Administration on the US housing crisis. In 2009 The Australian newspaper selected Christopher as one of Australia’s top 10 “Emerging Leaders” in its economic/wealth category. Christopher served as a Director of The Menzies Research Centre, which is a leading Australian think-tank, from 2003 to 2007. He received Joint 1st Class Honours (Economics & Finance) and the University Medal in Economics & Finance from the University of Sydney, where he was a Credit Suisse First Boston Scholar, SIRCA, and University Honours Scholar. He studied for a PhD at Cambridge University in 2002 and 2003, where he was a Commonwealth Trust scholarship recipient.

Steve Adamek, Credit Analyst Steve has been working with Smarter Money Investments since its launch in late 2011. Steve is widely regarded as one of Australia’s leading specialist credit analysts focussing on financial institutions, structured products, and utilities. Between 2000 and 2011 Steve was a Vice President and Credit Analyst at AllianceBernstein Australia Limited, which is one of Australia’s largest fixed-income fund managers. Steve was part of the portfolio management team for the $1 billion plus Australian Fixed Income Fund. Prior to AllianceBernstein, Steve was an Associate Director & Vice President of Project Finance at The Chase Manhattan Bank Australia Ltd where he managed direct control of lending lines worth USD795 million and Treasury lines worth USD190 million. Before Chase, Steve was a Manager of Project Finance at National Australia Bank Limited. Steve works exclusively with Smarter Money Investments on bottom-up credit research, specialising in the financials, asset-backed and infrastructure areas.

Phil Bayley, Credit Analyst Phil has been working with Smarter Money Investments since its launch in late 2011. Phil is a recognised expert in financial institutions credit analysis. Phil was previously Director of Capital Markets at Standard & Poor’s, where he produced independent analysis and opinion on the debt capital markets, influencing the perceptions of all market participants. From 2000-2005, he was Head of Fixed Interest, Credit Research, with the National Australia Bank and prior to that was Head of Research at Westpac Banking Corporation. Phil writes for Banking Day, Eureka Report and is also the publisher of The DCM Review, an independent electronic provider of commentary on the debt capital markets of Australia and New Zealand. He has completed a PhD at Monash


Page 45

University, furthering his research into the domestic debt capital market. Phil works exclusively with Smarter Money Investments on bottom-up credit research, specialising in the financials area.

Ed Teh, Credit Analyst Ed has been working with Smarter Money Investments since June 2013. Ed is a senior credit risk professional with over 15 years’ experience across fixed income funds management and bond insurance and corporate lending at leading domestic and global financial institutions. Ed has broad experience across industries and sectors, including: infrastructure and utilities, power and energy, property & real-estate, natural resources, oil & gas, media & telco, engineering and contracting, general industrials and agriculture. Ed was Director, Debt Products & Global Risk at Bank of America Merrill Lynch, Senior Credit Analyst, Fixed Income Credit Research at ING Investment Management and Assistant Vice President, Corporate Risk Management at Citigroup. Ed works exclusively with YBR Funds Management on bottom-up credit research across all sectors. Andrew McLachlan, Credit Analyst Andrew was the Credit Strategist at the $5.5 billion Australian fixed-income manager Vianova between 2008 and 2013 and its successor Brookline Partners (2014-2015) where he was responsible for all quantitative and qualitative credit analysis and valuation, as well as having input into macroeconomic strategy. He has over 15 year’s buy-side experience analysing Australian and indeed overseas credits from a bottom-up and top-down perspective and built and maintained the credit process at Perennial, Vianova and Brookline. Prior to Vianova, Andrew was a Senior Credit Analyst at the $6 billion fixed-income fund manager Perennial Investment Partners where he designed and implemented Perennial’s in-house credit risk pricing models. After 3 years working as an economist with various government agencies in Australia and overseas, Andrew started his private sector career at NAB where he spent 7 years working as an Economist focussing on quantitative industry analysis for Australia, the UK and the US. At NAB Andrew was heavily involved in developing commodity price and commercial property forecasting models that consistently outperformed consensus expectations. Alex Palfi, Risk Analyst (Part-Time) Alex has been working with Smarter Money Investments since its launch in late 2011. Alex, who has a Masters of Electrical Engineering from the University Of Canterbury, New Zealand, is an expert in the areas of risk management and quantitative applications. He worked for 14 years as a Division Director at Macquarie Bank in the Risk Management Group and also in the Quantitative Applications Division. Alex is a lecturer in seven financial mathematics courses at the Australian Financial Markets Association and provides specialist consulting services to various companies. He has helped build Smarter Money Investments customised risk management and pre-trade compliance models.


Page 46

Rob Morton, Head of Operations, Distribution and Investment Products Rob, has spent his career working in professional services and financial services. With expertise in law, finance, financial markets, investor relations and superannuation he has worked in the insurance industry, banking sector, funds management industry, property sector and in wealth management. He has degrees in Commerce and Law and holds Diplomas in Superannuation Management, Financial Planning and Investor Relations. He has worked as a Solicitor, as a superannuation specialist at the Norwich Group, a Division Director at Macquarie Bank and Investment Director at Colonial First State Global Funds Management with clients in the retail, advisor and institutional investor segments. Gary Walsh, Distribution Gary holds a Master of Commerce and has extensive industry experience, including National Distribution Manager - Risk and Investment Advisors Australia (RIAA); Head of Strategic Accounts - Select Asset Management; General Manager – Adviser Services and Distribution - Total Financial Solutions. Cosimo Vallelonga, Distribution Cosimo has a Bachelor of Commerce from the University of NSW, with expertise in financial accounting. He is currently completing a Masters of Finance at Macquarie University, specialising in corporate finance. He is part of the Finance Team at Yellow Brick Road Holdings Limited, working closely with the CFO. His role at Smarter Money Investments includes daily cash flow management, financial reporting and risk management analysis.

financial services council investment management questionnaire investment... · financial services...

Documents