Cross City tunnel investment has no further impact on members' benefits
Recent media coverage about Sydney's Cross City tunnel implies that investors will be severely impacted by losses. This investment has been written down to a zero value in the funds, and there can be no further impact on performance. This is one of many infrastructure assets held by the funds. It is usual that some of these assets perform well (for example, Melbourne Airport) and others do not. Having a diverse portfolio of these types of assets is one risk management strategy adopted by ARIA.
Is ARIA invested in the Cross City Tunnel?
ARIA had a $34 million investment in the Tunnel, as part of a mandate with investment manager Deutsche Asset Management. The Tunnel investment fell short of expectations. So, this investment was written down to $15 million earlier this year and, in September 2006, written down completely.
Is there any impact on members' earnings?
As this investment has been written down, the extremely small impact on members’ earnings is already reflected in your Fund’s exit rates or unit prices. There will be no further impact on earnings from this investment.
How does ARIA manage risks?
Risk is an unavoidable aspect of investing. No investment is risk free and we allow for losses, within acceptable levels, in our investment strategy for the PSS, CSS and PSSap.
Our risk management is driven by our primary investment objective to maximise long-term real returns whilst keeping risk to an acceptable level. One of the most important risk control measures a fund can take is diversification which involves spreading investments (and therefore the risk) across a range of asset classes and individual assets. We take diversification one step further, by diversifying in uncorrelated assets which means that performance in one asset is not directly linked to performance in another. Investment success is therefore judged by total investment returns, not the returns from a single investment.
ARIA operates in line with Australian Government best-practice corporate governance principles driven by legislation and policy which require ARIA to act in good faith, with prudence and in the members' best interests in respect of investments and administration. The Auditor-General is required to audit ARIA at least once each financial year.
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16 November 2006
