IFM

Question

Senator CADELL: The government's $175 million involves investment in IFM Investors, the debt fund. Can we talk about that for a bit? Mr Hopkins : We can. Senator CADELL: I've got a self-interest here. I worked for Port of Newcastle, and NSW Ports was owned by IFM Investors. That's owned by a whole lot of Australian super funds, is it not? Mr Hopkins : Correct. Senator CADELL: What was the nature of the investment? Mr Hopkins : I can ask my colleague to discuss it, but, effectively, you've hit the nail on the head. It was an investment that brought the Australian super funds into investments in South-East Asia. That was the primary benefit that we saw of the project. I'm going to ask my colleague to- Ms Copping : That is us investing equity, on the National Interest Account, into that- Senator CADELL: Is it national interest, not commercial? Ms Copping : Correct. It's the National Interest Account into that credit fund to crowd-in additional Australian investment into the region. Senator CADELL: Why was there a finance gap? It's a strange investment for me, because, in my dealings with them, they were bigger than God's undies. They had more money than they could ever poke a stick at. Why was government investment needed in this regard? Ms Copping : This is part of IFM's expansion into South-East Asia. In that transaction, that investment, we are playing a demonstration and crowding-in role that will enable IFM to build a pipeline and demonstrate their capacity to their investors as well as their experience, knowledge and understanding of the Asian market. They've asked us to invest with them so that they can build that pipeline and demonstrate that to then crowd-in additional Australian investment from the super funds into that credit fund. Senator CADELL: My knowledge at the time-I don't know about now-was that they had over $250 billion themselves. It seems odd. Was it more that they wanted government involvement to show goodwill? It seems a small amount when they've got a quarter of $1 trillion. Senator Ayres: Essentially, the South-East Asia economic strategy that the government launched last term identified as a strategic weakness for Australia that we're underinvested and not engaged deeply in our investment community, in particular, in the region but also in our trading relationships. Building that investment capability has involved deal teams being established in key South-East Asian financial and investment centres. I think they're called 'business champions' from the Australian corporate sector, appointed in every ASEAN economy. It's been a very large effort to engage our investment community, not just industry super capability but our broader private capability as well, in this kind of activity. This investment is consistent with that. It's about building confidence and capability to do all of the things that, in many cases, take firms many years to get the confidence to do-to be able to invest in particular propositions in Jakarta, Manila or Ho Chi Minh City. Senator CADELL: This investment came from the National Interest Account at the direction of government? Mr Hopkins : Correct. Senator CADELL: Prior, did they apply under the commercial account? Ms Copping : No, because at that point in time we didn't have the powers to provide equity on the commercial account. Senator CADELL: So it's not a loan; it's an equity- Ms Copping : It's an equity investment. Senator CADELL: On a single project? Overall, it's not going into IFM's funds based on a single project they're doing? Ms Copping : No. It's into their credit fund, which will then provide finance across multiple projects. Senator CADELL: With their specific links to Australian exporters, would they be involved in these projects or is it an overall umbrella? Ms Copping : It's about expanding the overseas financing and investing of IFM and then the super funds as part of the mandate. Mr Hopkins : As the minister said to you, deal teams made up of Austrade and DFAT are in place in South-East Asia. They monitor those projects and look for opportunities for Australian business to leverage off those investments. It's not 'set and forget' once the investment has been made. Our colleagues from Austrade, DFAT and others work to ensure that Australian involvement continues not only in the investment itself but also in the underlying investments made by the fund. Senator CADELL: We talked about multiple projects. Was there a bundle of projects that was specified or was it open-ended? Senator Ayres: Typically, each of these centres has a pipeline of projects at various stages of viability, and I assume it's consistent with that. It's very unlikely that this would be the only source of capital for each of those projects. There's an effort- Senator CADELL: When you have $250 billion, I don't think $175 million is going to touch- Senator Ayres: But it is in Australia's interest that that capital be engaged in a way that is consistent with the South-East Asia economic strategy. That is the national interest calculation here. Senator CADELL: That's not the bit that raises my inquiry of this. It seems such a small amount for a big capital fund to take an equity position that it wouldn't make a significant difference. Senator Ayres: It's encouraged them to do it. Mr Hopkins : Senator, you raised the issue earlier about how having the Australian government investing alongside you makes a huge impact in terms of South-East Asia in terms of how the market perceives that investment. Senator CADELL: There was an article I read earlier-actually in the dinner break-that was talking about industry super funds losing 17 per cent to self-managed super funds in the last 12 months. Were there any concerns that they might have a lot of balance sheet money? Was there a liquidity problem or anything like that that needed us to get involved? Senator Ayres: I think that question is probably outside the scope of this committee, but, as I understand it, it relates to a set of challenges that go to the age profile moving through in superannuation. What people are doing is moving out of their accumulation accounts into essentially pension accounts or however they're managing it. There is a bit of lumpiness to that. It's got very little to do with what's happening on the investment side. Senator CADELL: We said we've assumed there were bundled projects in the pipeline as part of the application. Were you made aware of the pipeline of projects they are interested in? Mr Hopkins : We're responsible for pulling together some of that pipeline in the deal team's arena. Senator CADELL: Are any at FID yet? Ms Copping : The investments are at various stages of development. Senator CADELL: Are any at FID yet? Ms Copping : We can provide additional information, but obviously that information sits- Senator CADELL: Commercial in-confidence. Ms Copping : within the fund, and the investment is into the fund rather than project by project. It's amassed over time. Senator CADELL: Into the fund? The government would normally get dividends. Are there any other fees that we're collecting as part of this? Is this normally part of a dividend, with normal returns like a normal investor? Mr Hopkins : Normal return. Ms Copping : Normal return, and we are investing on a commercial basis, like the other investors, into that fund. Senator CADELL: What's the withdrawal capability of it? Is it on notice? Is it a period of time? Ms Copping : I'll have to take advice. Obviously, there are various confidentiality requirements, as you would expect, that impact others in the fund as well, so I'll have to take that response on notice.