FUNDS SA INVESTMENTS

394 Mr HAMILTON-SMITH (Waite—Leader of the Opposition) (17 November 2008). With respect to the report of the Auditor-General 2007-08—part B, volume 3, page 745:

(a) why were new investment products added to the category 'other' investments in 2007-08 and;

(b) what was the net change in these new investment products in 2007-08?

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations): I have been provided the following information:

(a) The 'other' investment category includes the Inflation Linked Securities and Diversified Strategies Income asset classes. The target asset allocation for these sectors was 13 per cent and 5 per cent respectively as at 30 June 2008.

As at 30 June 2007 the Fund had a target allocation for Inflation Linked Securities of 13 per cent, and a target allocation for Hybrid Securities of 5 per cent.

Funds SA incorporate their exposure to Hybrid Securities into a broader asset class called Diversified Strategies Income (DSI). Strategies adopted by the Funds SA DSI portfolio are defined as investment opportunities with expected returns between that of bonds and equities, not readily classifiable within the other asset classes.

When considering the asset management products offered by Funds SA, the Motor Accident Commission determined that the DSI product offered by Funds SA was an acceptable fit to the portfolio to replace the Hybrid exposure.

(b) Over the period invested (December 07—June 08) the DSI product provided a return of 3.6 per cent, slightly below the benchmark for the period of 4.2 per cent. The Inflation Linked Bond sector returned 6.0 per cent for the year, compared to a benchmark of 6.2 per cent.