Cbus, the A$32 billion ($23.8 billion) superannuation fund for Australia’s construction and building industries, hired Brisbane-based money manager QIC to oversee an options program the two developed together to manage portfolio risk.
The program — built primarily around put options — will be used opportunistically, for example, at times when a bullish consensus on equity markets makes for a low entry point in terms of option pricing, said Tim Ridley, Melbourne-based Cbus’ investment manager, strategy, in an interview.
Cbus “will work alongside QIC to determine whether the program is scaled up or down, dependent on the relative merit of options to other risk strategies available,” a Cbus news release said.
Cbus, like other Australian superannuation funds, has added fixed income or cash to reduce overall portfolio risk when its investment team has a negative view on risk assets, but the options program, exercised at the total portfolio level, provides the fund with “an addition tool” to manage risk, Mr. Ridley said.
Cbus didn’t provide details on the level of fees QIC would receive for running the program.
Kristian Fok, executive manager, investment strategy at Cbus, said in the news release, “We view this as the beginning of a broader relationship with QIC,” which will give Cbus “access to strategies and ideas that may generate more opportunities for us going forward.”
A QIC spokesman couldn’t immediately be reached for comment.