Mr O’Brien’s appointment fills the vacancy created by the retirement of founding QIC GRE team member and long-term Managing Director Steve Leigh, announced in 2018.

Announcing the appointment, QIC Chief Executive Officer Damien Frawley said: “Following a thorough executive search as part of the planned leadership transition in Global Real Estate (GRE), I am pleased to announce Michael O’Brien as the new Managing Director of GRE. Michael has a distinguished, 30-year real estate career and an impressive record of accomplishment in shopping centre management and development, real estate funds management and finance. His leadership qualities and market acumen will ensure that our real estate platform continues to deliver strong investment returns, building on the outstanding track record of Steve Leigh and QIC GRE.”
Mr O’Brien is currently Chief Financial Officer and former Chief Investment Officer of Vicinity Centres, Australia’s second largest listed manager of retail property, with responsibility for the investment strategy for an integrated asset management platform with some $26 billion in retail assets under management across 62 shopping centres.

Mr O’Brien has held senior investment and operational roles with Vicinity Centres, GPT Group and Lend Lease Corporation. While at Vicinity Centres, he has been responsible for the organisation’s finance, investment management and capital transactions, as well as its wholesale funds and strategic partnerships business. In his most recent role, he led the investment strategy for a retail portfolio with a significant pipeline of mixed-use development, similar to that of QIC.

Commenting on his appointment, Mr O’Brien said: “I am delighted to join QIC and assume responsibility for QIC’s global real estate platform. It will be a privilege to lead a world-class team of real estate specialists with significant operational and investment management expertise which has delivered strong investment returns for QIC’s clients. QIC’s heritage, track record, and well-deserved reputation among clients and counterparties, provides a strong foundation for future performance through both cyclical and systemic market changes.”

In this key leadership position at QIC, Mr O’Brien will report to QIC’s CEO Damien Frawley, serve on the QIC Executive Committee, and lead a team of more than 500 people globally managing 50 assets. QIC’s real estate portfolio is currently valued at approximately A$22.4 billion (US$15.7 billion) as at 31 December 2018 and is invested on behalf of institutional clients via cross pooled and segregated mandates.

David Asplin, QIC GRE Chief Operating Officer, has been appointed Acting Managing Director of QIC GRE during the leadership transition.

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Damien Frawley

Leading Australian investment manager, QIC has announced it has signed an agreement(s) to acquire an 80 per cent interest in the North Australian Pastoral Company (NAP).

NAP is one of Australia’s oldest and largest agricultural enterprises covering 5.8 million hectares across Queensland and the Northern Territory and approximately 178,000 head of cattle.

At the conclusion of the transaction, NAP’s largest shareholder, the Foster family will retain an interest in NAP of approximately 20 per cent. Funds advised by QIC including Australian superannuation capital and the UK-based Pension Protection Fund (PPF) will hold approximately 80 per cent having acquired the remainder of the Foster family’s holding and the 34 per cent of NAP currently owned by UK-listed MP Evans.

An offer will be made to other minority shareholders to acquire their shares as part of the transaction, and offer them the opportunity, should they wish, to retain an interest in NAP.

NAP is a vertically integrated beef business with a herd managed across 13 well-located properties in Queensland and the Northern Territory as well as the Wainui feedlot on the Darling Downs.

It is an industry leader in advanced composite breeding programs and has developed two of its own highly regarded composite breeds.

Commenting on the transaction, Damien Frawley, QIC’s CEO said: “QIC is very proud to lead this investment in Australian agriculture and to be investing Australian superannuation assets into our beef industry. This landmark deal was made possible by our unique government heritage, and it captures the benefit of our networks of institutional investors and connections to Asian corporate relationships. It’s a natural evolution for our 25 year-old investment platform.”

Marcus Simpson, head of QIC’s NAP transaction team, said, “We believe the Australian food sector is entering a period of exciting development.

Australia enjoys an enviable reputation for producing clean, healthy food. QIC has a track record of making long-term investments in companies and their people. Our vision for NAP is to see it prosper by capitalising on strong beef demand driven by growth in Asia which is expected to account for 47 per cent of global beef demand by 2024.”

Mr Simpson said QIC was delighted the Foster family would retain a 20 per cent shareholding in the company.

A Foster family representative said: “This is an excellent outcome for the Company. QIC is a logical owner of NAP bringing with it exciting prospects for the future growth of the business. We feel assured that NAP has a bright future, as evidenced by the family’s ongoing investment.”

Executive Chair of NAP Nigel Alexander said: “The Foster family and NAP’s management have built an outstanding beef enterprise over many generations, and are justifiably proud of what has been achieved. Under QIC’s stewardship NAP is entering an exciting new phase of its development. I’m very confident QIC has the vision and expertise to build the company into the future.”

Consistent with his long term intentions, Mr Alexander also announced his intention to step down from his role after 20 years with NAP, but has agreed to remain in the role until a successor commences.

QIC’s representative on the NAP Board Phil Cummins thanked Mr Alexander for his ongoing contribution to NAP and Australian agriculture and said the company had a strong legacy to build on.

Mr Cummins said: “NAP has exceptional properties, cattle and management and we believe cattle men and women are the best people to run cattle properties. QIC also has significant business development skills to bring to the table. Together we will be a great team. NAP is already one of Australia’s leading cattle businesses and with an ongoing commitment to operational excellence, we believe NAP has the potential to become a significant regional food champion.”

“We are also strongly committed to NAP’s high standards of workplace health and safety, animal welfare and sustainable land management practices,” he said.

QIC were advised by Deloitte Corporate Finance (lead financial adviser), PricewaterhouseCoopers (accounting and tax) and McCullough Robertson (legal).

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Mr Belman will lead the firm’s infrastructure origination, investment and execution efforts in North America. QIC is one of Australia’s largest institutional investment managers, offering infrastructure, real estate, private equity, liquid strategies and multi-asset investments.

Mr Belman’s appointment is part of QIC’s geographic expansion strategy and further deepens the firm’s sector expertise in the infrastructure space. This hiring follows the appointment in March 2015 of Giles Tucker in London to develop QIC’s European infrastructure investments efforts and Vittorio Lacagnina in October 2014 to lead investor origination in infrastructure across the Northern Hemisphere.

Ross Israel, Head of QIC’s Global Infrastructure said: “I’m delighted that an infrastructure executive of Eric’s calibre is joining QIC. He will be pivotal in helping to lead and execute QIC’s global infrastructure offering. Eric’s appointment deepens the experience of our team across key sectors and geographies.”

Mr Israel continued: “Eric has an outstanding record of achievement in complex industries, including energy assets and other global infrastructure. His deep understanding of the North American marketplace, where we currently have A$620 million (US$435 million) of infrastructure investments, and in operating infrastructure businesses will be of tremendous benefit to QIC.”

Mr Belman said: “I am excited to join a firm of QIC’s stature and reputation. I look forward to bringing my experience in infrastructure, technology and corporate strategy to QIC and helping build its relationships and broaden its investment opportunities and offerings in North America.”

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QGIF has secured commitments from a range of institutional investors including Hostplus, one of Australia’s largest superannuation funds, an Asian sovereign wealth fund, one of China’s leading insurers and two foundation QIC clients. An additional commitment has also been made under a co-investment arrangement.

Ross Israel, Head of QIC Global Infrastructure said “I’m delighted by the level of support and fund commitments that QGIF has been able to secure in this first close as a result of our focused marketing efforts and a strong potential investment pipeline.”

QGIF is an unlisted investment vehicle that seeks to provide institutional investors with access to attractive, risk-adjusted returns through long-term exposure to a diversified portfolio of global infrastructure assets.

The Fund will offer investors access to a large investable universe of attractive infrastructure assets in developed OECD economies with a focus towards Australia. The Fund is targeting A$1.75 billion of total capital commitments.

QGIF was formally launched earlier this year, driven by investor demand to access QIC’s infrastructure team and its strategy. QGIF will be managed by the same team executing the same investment strategy that has delivered a strong track record over the last nine years across three core sectors – transport, energy utilities and Public Private Partnerships.

QGIF’s first close triggers the commencement of the Fund’s investment period and the ability for the Fund to deploy capital.

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Katrina King

Fixed income investors should be factoring a rise in the term premium into their planning, according to QIC, one of Australia’s largest institutional investment managers. The QIC Global Liquid Strategies (GLS) team is conservatively anticipating normalisation of around 50 basis points.

The ‘term premium’ defines the compensation required by investors for holding long-term debt, as opposed to continually rolling over short term debt.

“For some years now, the term premium has all but evaporated or even been in the negative. In essence this means there’s been no excess compensation for investors holding long term debt,” explained Susan Buckley, MD of QIC’s GLS team. “But we have identified a range of global factors that signal a return to higher levels – and believe investors should be acting upon this return sooner rather than later.”

These factors include a “normalisation” of monetary policy following the US’s withdrawal of quantitative easing, investors’ demand for higher compensation to counter increased illiquidity caused by increased regulation in the finance sector and the general expectation of higher interest rates and inflation.

The nearing of peak foreign ownership of US Treasuries and sovereign investors’ consequent move to new asset classes is another driver. That includes increased interest in the Chinese renminbi as a currency, coinciding with the debate about its inclusion in the IMF’s standard drawing right basket and its new, more freely traded basis.

“Investors should understand that the return of the term premium does not signal a return to ‘normal’,” said Katrina King, GLS’ Director of Research and Strategy.

‘This time is different’ are said to be the four most dangerous words in economics and markets. Well, this era really is different. For a start, the term premium has spiked three times since the global financial crisis, showing that that term premium can move quickly and undercut unprepared portfolios. Then there is the emergence of a new risk, illiquidity, which investors are only now starting to give thought to. There is a rising tide of commentary on the new threat, but few ideas on how to counter it.”

Against this backdrop, QIC’s view is that fast, targeted responses to market adjustments will be critical for success. Inflation protection and inflation-related assets warrant renewed attention as will favouring short rates positions when valuations show mis-pricing.

“Rising inflation should not be a source of alarm – we are looking at moderate levels that we believe offer return opportunities for investors that look beyond the present and signal a welcome step-change in the post-GFC era,” explained Ms King.

“The upshot is that the extended holiday from risk premium is coming to an end – and that is a good thing. The return of the term premium represents a significant step up from the current broadly zero figure. For best results, investors must adjust to its return – but doing so may well test some nerves,” concluded Ms Buckley.

Read more in QIC’s latest Red Paper: The term premium is down but not out: prepare for its return.

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Reporting into Scott Rissman, Director, Liability-driven and Overlay Solutions, Mr Simmons’ hire supports the increasing number of clients who look to QIC for tailored implementation solutions.

Managing Director of QIC’s Global Liquids Strategies team, Susan Buckley, said: “This hire reflects the increasing client demand for QIC’s tailored implementation capabilities across currency management, liquidity risk management, cash equitisation, asset rebalancing, protection overlays, portfolio structuring and liability-driven overlays.”

Mr Simmons, who has been a FX professional for 15 years, has deep skills and experience that fit with GLS’ investment process built around the fundamental, transitory and technical factors that drive markets.

Previously, Mr Simmons was Managing Director and Head of Execution at Principal Global Investors (London) where his role encompassed portfolio management, trading, portfolio construction and risk management functions. Most recently he was a Director in FX Sales at ANZ (London).

Mr Simmons began his career at BT Financial Group working with Susan Buckley.

Mr Simmons commenced at QIC on 13 April 2015.

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Mr Costello has previously been the inaugural Managing Director of the Future Fund and the first CEO of the New Zealand Superannuation Fund.

The Committee will review all investment and divestment proposals made by QIC’s Global Infrastructure team. Its other key responsibilities are to ensure that risks are satisfactorily identified, managed, measured and reported on.

Commenting on Mr Costello’s new leadership role, QIC CEO Damien Frawley said, “Paul’s appointment further underscores our commitment to world class investment management, strong governance and deep risk management. We have significant global growth plans for our infrastructure capability and his role will be important to its success.”

Mr Costello started in the role at QIC in late 2014. The Committee will comprise members of QIC’s Global Infrastructure team incuding the two founders Ross Israel and Matina Papathanasiou and two Partners on a rotating basis. In addition to Mr Costello as Independent Chairman, the committee will also include Peter Forbes, a highly experienced independent expert.

Speaking about his appointment, Mr Costello said: “I’m pleased to be joining QIC at an especially exciting time for its global infrastructure capability. Governments around the world are recognising a greater role for private sector participation in infrastructure and QIC’s infrastructure pedigree is second to none. I look forward to helping QIC expand its infrastructure funds management offerings to clients. “

QIC pointed to Mr Costello’s appointment as further evidence of its commitment to its infrastructure capability, noting that it also recently developed a global infrastructure fund, the QIC Global Infrastructure Fund, that is now open to Australian institutional investors and is intended to be made available to offshore investors.

The QIC Global Infrastructure Fund has secured cornerstone commitments totalling A$645 million from four investors comprising two QIC foundation clients, an Asian sovereign wealth fund and a major Australiansuperannuation fund.

Action is also underway to gain regulatory fund registrations for the Fund in a number of international jurisdictions.

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Speaking on the release of QIC’s Red Paper Au revoir credit beta: meet credit alpha, QIC’s Director of Fixed Income Research & Strategy, Katrina King, yesterday warned that institutional investors accustomed to strong returns from credit markets in recent years will need to re-think their current strategies or risk seeing the capital value of their portfolios eroded.

Ms. King said that while it is true that credit markets have been a strong source of capital returns in recent years and corporate bond yields are currently at their lowest level since the GFC, the economic environment is starting to change.

“It’s true that the situation today is still quite constructive overall, but as economic growth picks up and central banks move to normalise monetary policy, yields will gradually rise. Portfolios which simply rode the spread tightening of the past few years will be threatened,” she explained.

In Ms. King’s view, for institutional investors to benefit from corporate bonds’ yield advantage, they will need to take a truly active investment approach and look at removing both interest rate and inflation risk from their credit allocations.

“Inflation may be muted now, but it remains a worrying undercurrent,” she said. “Credit spreads have tended to rise when inflation uncertainty has risen. Investors have just lived through a lengthy period of ultra-low official interest rates which, while not our base case, carries the risk of causing an inflation outbreak.”

Ms. King said that at the same time, global economic conditions are improving, and businesses are responding positively. Shareholders are beginning to expect higher returns, which in turn puts pressure on management to take less risk-averse positions.

“I certainly don’t mean to suggest that companies are about to play fast and loose with their finances, but there is a definite sense that company-level risk is on the rise,” she said.

Long-only credit strategies, which have worked well over the past few years as global investors fled risk in all forms, are now less likely to perform. The next phase of the credit cycle will require much deeper analysis industry by industry and company by company to identify vulnerable companies as well as those with reassuring credit metrics.

Ms. King concluded that with the right approach to credit, investors have nothing to fear from the changing world order, and that truly active investors will find plenty of opportunity to exploit price gaps between industries as well as individual companies.

“At QIC our focus on outcomes has meant that we are happy to decouple from the benchmark and manage the three levers of inflation, interest rate and credit risk separately, in order to harness multiple alpha sources.”

“Current market conditions are calling out for this kind of unconstrained approach, including macro positions and long short trades between different indices in order to make the most of corporate bonds’ yield advantage,” she said.

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Beware the risks associated with benchmarks.

In an uncertain market, an absolute return focus rather than a benchmark driven one is more likely to protect fixed income investors – as disappointing financial year returns from many benchmark driven funds have already indicated.

According to Susan Buckley, Managing Director of Global Fixed Interest for investment manager QIC, there are inherent risks associated with benchmarks – and the current environment serves only to exacerbate those risks.

“Benchmarks have long durations, meaning they are sensitive to interest rate movements. Security selection is about issuance not investor return profiles, because the biggest debtors make up the largest component.”

Ms Buckley went on to explain that QIC has a different approach, focusing on building a portfolio which manages interest rate, credit and inflation risk separately according to what is influencing markets at any particular time. The returns of the QIC Inflation Plus Fund, compared with those from the UBS Government Inflation Index, support this approach.

The index returned -1.45% for the year to 30 June 2013, compared with a return of 5.36% from the QIC fund for the same period.

“No one will be surprised to hear me say that the rally we’ve seen in fixed interest from the end of the global financial crisis until late last year is unlikely to continue. But as interest rates inevitably rise, many of the benchmark driven investment approaches will disappoint investors.”
Moving on to discuss the themes in fixed interest markets for the 2012/13 financial year, Ms Buckley said that for the first time since 1994, the Australian Government Inflation benchmark produced a negative result.

“The result wasn’t entirely unexpected because the dominant risk associated with investing in these benchmarks is their sensitivity to interest rate movements. Returns fall sharply when yields rise in the aggressive manner we saw in May and June this year,” she said.

Ms Buckley then explained that yields began rising on the back of comments from the Chairman of the US Federal Reserve, Ben Bernanke. He intimated that the recovery in the US economy had progressed to a point where the program of quantitative easing (QE) might be wound back. This prompted a flurry of activity in May and June. Yields on both US 10 Year Treasuries and Australian 10 Year Bonds rose by 1% in 8 weeks – sending returns into free-fall.

In fact, uncertainty about the effect of the US Federal Reserve’s policies decimated returns from some of the biggest benchmark driven bond funds globally. One example of this impact was seen in the PIMCO Total Return Fund, the world’s biggest bond fund managed by fund manager Bill Gross. Mr Gross had been investing on the basis that quantitative easing would ultimately fuel inflation, and yet the fund fell 4.7% between May and June this year as markets disagreed.

In conclusion, Ms Buckley reminded investors that a rising tide lifts all boats, and that this has been the case in fixed interest until recently. Everyone wanted to go long on bonds as they rallied on aggressive buying from central banks. However, the world is looking different now. The yield cycle has likely troughed and, as liquidity injections from central banks diminish, yields are likely to return to more ‘normal’ levels.

“We understand that moving from a benchmark approach to absolute return is big decision, but I firmly believe a diversified portfolio with no bias to a benchmark or any particular risk factor is a superior solution for investors,” Ms Buckley said.

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This new role will be responsible for sales and marketing, client services and product development for GRE.

“QIC is looking to strengthen its sales and distribution capability and David is an experienced professional having worked for both LaSalle Funds Management and Challenger Funds Management,” said Paul Leitch QIC Managing Director, Human Resources and Corporate Communications.

“David has extensive experience in alternative assets and will work directly with incoming Managing Director, QIC GRE Steven Leigh to grow the global real estate business.”

David will commence with QIC GRE on Tuesday 7 August. QIC GRE is a leading Australian real estate manager that has over the two decades acquired and developed a significant portfolio of dominant regional shopping centres and commercial buildings valued at $8b.  QIC is Australia’s third largest institutional investor* with $64.7 billion in funds under management as at 30 June 2012.

17 July 2012

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