TCorp moves to new OneFund structure

As previously flagged, the New South Wales government is moving forward with plans to consolidate several separate investment funds managed by TCorp.

In September last year, the state government announced it was reviewing the way NSW's investment funds were managed, tasking TCorp with developing a new funds management strategy. More recently, last month TCorp confirmed to Financial Standard that it was moving "to a more client aligned operating structure and simpler portfolio environment."

Now, in the state's 2024/25 Budget, that plan has been finalised.

The government is creating OneFund, which sees the Debt Retirement Fund, NSW Infrastructure Future Fund, Social and Affordable Housing Fund, Snowy Hydro Legacy Fund, Treasury Managed Fund and Long Service Corporation funds combined, along with certain other SelfInsurance Corporation funds.

In total, upon establishment, OneFund will have $46.7 billion in funds under management. This is expected to grow to $52.4 billion by June 2027.

The separate funds will be invested through the same master fund as if they were one fund while maintaining their individual mandates.

"... pooling their resources through a master fund structure can help enable a broader range of investment opportunities and the possibility to invest more efficiently. OneFund will be complemented by a new framework, which will enable a more efficient way of keeping the investment funds in OneFund appropriately funded to meet their policy requirements," Budget documents read.

The move, which is effective August 31, is expected to drive higher returns for each fund while also delivering efficiencies on the back of a more streamlined structure.

OneFund will target returns of 4.5% plus CPI over rolling 10-year periods, increasing risk slightly across the individual funds to do so.

Creating OneFund is also expected to generate an additional $1.6 billion return and keep gross debt lower.

TCorp chief investment officer Stewart Brentnall said the new approach which will "provide an opportunity to optimise the state's balance sheet to generate higher returns over the long term."

"Managing disparate funds as one is the right decision and will deliver a significantly better combined outcome compared to the sum of the individual funds," Brentnall said.

"Under the OneFund approach, the funds will benefit from pooling under one new cost-effective structure and from the removal of portfolio investment constraints. This will enable higher returns for each of the funds over the longer term, through more efficient use of risk."

He said he believes the new structure achieves five important outcomes.

"It will reduce concentration, liquidity and asset specific risks, minimise the prospect of selling assets during a period of negative returns, and

"This is an exciting initiative by the NSW government, and one we believe has the potential to generate a significant financial impact for the state."

TCorp has been restructuring in anticipation of the new operating structure.

Last month, the organisation confirmed the departure of its head of portfolio construction Tanya Branwhite and head of portfolio delivery Adrian Trollor.

Meantime, Ali Parker was appointed head of investment research and strategy, James Murray was named head of listed and unlisted asset management, and Simon Murphy saw his role as head of cash and fixed income expanded to head of treasury and exposure management.

Alexis Cheang's role of head of investment stewardship remains as is, while another role - head of client advice and portfolios - is being recruited for.

In total, TCorp manages about $110 billion in assets on behalf of the NSW government.