Local Government Super, the A$13 billion ($10 billion) super fund focused on New South Wales' public employees, hired Challenger to invest A$200 million in an enhanced global equities index strategy.
The strategy's mandated return includes "an agreed contractual margin over a benchmark index" that can provide a boost to expected total returns, according to a joint news release by the Sydney-based organizations.
The hire comes with no management fees. Challenger, Australia’s biggest fixed income manager, swaps out the equity risk with an investment bank for a fixed period, investing the A$200 million in mostly investment grade fixed income and uses the returns generated to cover the agreed contractual margin over the benchmark while retaining any excess.
Craig Turnbull, LGS chief investment officer, in the news release praised Challenger's ability to offer "innovative products that deliver low-cost returns for LGS members." Mr. Turnbull could not be reached for further comment on the hire.