Wednesday, December 14, 2011

Will Prof. Flannery Make Up The Shortfall?

AT CATALLAXY, Judith Sloan expands on a 7.30 report about red-ink woes at UniSuper, the $30 billion fund intended to make sure academics (and, sadly, broom-wielding lesser mortals) remain as comfortable and inactive in retirement as were most at the lectern. While this is not a concern for the Professor, who invested in a venture blessed by solid cash flow and ever-tumescent demand, some of the entries in Unisuper's portfolio cannot be doing well. Put this down to a tendency, ever present in common room and on campus, for putting principle above principal.

Take this statement of the fund's green inclinations, for example. Or, better yet, click on that page's link to the funds Climate Change Position Statement, where you will find the following:

* where possible and appropriate, incorporate climate change considerations across all asset classes and internally assess investment-related climate change risks and opportunities.

and this one

 * continue to support and encourage investee companies (both listed and unlisted), through a range of methods, to actively manage their carbon emissions (including target setting, measurement, monitoring, reporting and external verification) and publicly disclose their performance.

To be fair, it would appear UniSuper's crisis has more to do with the fund's structure and absence of an employer guarantee than to greenmania.

Still, it is rather appealing to imagine the likes of Stephan Loondowsky huddled beneath a bridge and pondering whether to burn his worthless UniSuper statements or take the more sustainable option and stuff them for warmth and comfort inside his ragged trousers.

For those who did nothing to inspire this madness and will also be screwed there can be nothing but sympathy.

OUCH! UPDATE: Talieh Williams, head of Governance and Sustainable Investment at UniSuper, has the sort of CV that she suggests she may well be the smartest person in any passively heated candle-lit room. Monash, RMIT and Harvard Business School -- it is a most impressive pedigree, and those sheepskins go very nicely with what has been a flourishing, green-themed career that has included stops at Shell and Ernst & Young.

She does seem to have at least one blind spot, however, especially when it comes to appreciating that sustainability can bring much pain.

GONE-TO-WATER UPDATE: UniSuper has a 26% interest in AquaSure, operator of the gold-plated desalination plant Victoria does not need and cannot afford. The fund's $200 million investment looks like a solid proposition as "revenue streams on this project feature an availability based PPP [public private partnership] payment from the Victorian State Government, so equity investors effectively do not bear demand risk."

However, there is this:  "The payment stream is also subject to the ability of the design and construction, and facilities management contractors to deliver and maintain the asset."

So far, with the (deliciously) rain-delayed project running horrendously late and over budget, the design and construction team's "ability" has yet to be demonstrated.

GOLF UPDATE: There isn't one. Back after 18 holes.

10 comments:

  1. Elizabeth (Lizzie) B.December 14, 2011 at 4:21 PM

    Cher Professor, every day you come up with a new version of shock and awe. Your investment choices come up to scratch here. I am so glad that UniSuper has not got you by parts of the anatomy that if damaged might make your investments seem possibly less personally rewarding should you wish to avail youself of some mooted discounting (however such concern is probably unnecessary, as I think also your current squeeze may have a teeny objection to you furthering your investor research in this manner even should you be so inclined).

    I had an inkling that UniSuper investments were of a rather green tinge but not that they were also quite so salty. All the better to bed down the pork, I guess they thought, but they were wrong, n'est-ce pas?

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  2. Before retirement into a well-earned dotage, I was a taxation consultant, with an emphasis on self-managed super funds. I was asked whether an accountant's client had breached any laws by having his SMSF invest in a green-power scheme.

    For $1 million (yes, $1 million!) his SMSF invested in a tidal power generator which generated $0.15 worth of power each hour. Do your own maths - that's $1,300 per year on a $1m investment. That was 100% of the fund's investments! [eggs/basket, anyone?]

    My retirement will be more prosperous than his client's retirement.

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  3. What, exactly, does one do for < 1year at Harvard Business school ?

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  4. I note that our sustainability wunderkinder lists under 'education':
    Harvard Business School
    2008 – 2008
    That smacks to me of 'I was sent on a short non-award course'. Note: no qualification listed; academic year in the US runs from roughly September to May, so even a one year degree course (MBA??) would involve two calendar years. If you have qualifications, you specify them.
    Reminds me of the Goon Show line: 'I went to Eton' (to make a delivery or whatever).

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  5. I liked this bit:
    'A CYCLIST who required plastic surgery after a horrific crash has vowed never to use Beach Rd again until parking is banned along its entire length.'
    Sort of a 'Non-Occupy threat'. She wants to ban the cars - that are registered and thus their owners pay the insurance that doubtless covered her medical bills - so that she can ride unimpeded. That'd be sustainable.

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  6. George W Bush is an MBA from Harvard !! Perhaps it should be an MFA ! They don't as a rule know much ?

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  7. Had to laugh at Loondowsky bemoaning MSM for not spruiking up last April's Verdantrix Report whereby it's predicted-
    "The Australian sustainable business market will grow to $2.9bn in 2014 from $1.6bn in 2010, according to a new report from independent analyst firm Verdantix." in particular-
    "Innovative firms like CarbonSystems, Energetics, Intelligent Pathways and WSP Environment & Energy already benefit from the market for energy efficiency and carbon management."
    Every damn one of them is a bunch of consultants, advisers and thinkers in residence just waiting to strip real doers and makers of their dough with environmental sustainability plans and systems and the like. Well apart from the power generators forced to charge the carbon tax and implement Gummint Greening pogroms of course. Pure bloody admin leeching off industry and this is Loondowsky's 'sustainable' jobs future. 'The curious invisibility of progress' to be sure looney toon.

    observa

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  8. Seagoon: Is that an Eton tie you're wearing?
    Eccles: Yup!
    Seagoon: What did you do at Eton?
    Eccles: I bought a tie.

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  9. UNISUPER has however provided a service and a lesson for us all in something else they have done.

    Nearly ten years ago they introduced a "socially responsible high growth" option that was directly comparable with their existing "high growth" option, but was of course so much better because it invested only in good things "selected on the basis of sustainable criteria".

    Despite all the subsidies in the meantime for renewable power, desal plants and so on, and all the punitive taxes and regulations on drinking, smoking, gambling etc., the "socially responsible high growth" option has returned 40 per cent less than its irresponsible brother and in fact performed worse than any other UNISUPER option over the past seven years.

    Super funds should sack their "sustainability officers". They would not only save the salaries of these bludgers, they would also prevent their members from coming a cropper by investing in subsidised and hence inherently risky and intrinsically low-return assets.

    Relevant UNISUPER links:

    http://www.unisuper.com.au/investments/options-and-performance/super-performance/socially-responsible-high-growth

    http://www.unisuper.com.au/investments/options-and-performance/super-performance

    http://www.unisuper.com.au/investments/options-and-performance/pension-performance

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  10. Self managed super fund is useful for everyone. Managing your own fund can be much better to save your money.

    Setup Self Managed Super Fund

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