Russell Investment Management Ltd

Transcription

1 Russell Investment Management Ltd ABN AFSL Part A Derivative Risk Statement For Russell Funds 10 March 2014

2 Table of Contents Collective Investments Name of Collective Investment Objective of this Statement Overall Investment Objectives & Strategies Delegated Investment Managers Russell s Internal Resources Identification of External Investment Managers DRS Authorisation of Derivatives Authorisation of Part A DRS...5

3 Collective Investments Name of Collective Investment Prepared by Russell Investment Management Ltd ( RIM ), for all the Russell Funds ( Funds ) which invest in or have exposure to derivatives investments, for which RIM is the responsible entity, trustee, or investment manager: Russell Australian Shares Fund Russell Australian Shares Enhanced Income Fund Russell Australian Opportunities Fund Russell Australian Bond Fund Russell Australian Bond Income Fund Russell Australian Government Bond ETF Russell Australian Semi-Government Bond ETF Russell Australian Select Corporate Bond ETF Russell International Property Securities Fund - $A Hedged Russell Australian Cash Fund Russell Australian Cash Enhanced Fund Russell Inflation Linked Bond Fund Russell International Shares Fund Russell International Shares Fund - $A Hedged Russell International Shares Index Fund - $A Hedged Russell Australian Shares Tracker Fund Russell International Bond Fund - $A Hedged Russell Global Opportunities Fund Russell Global Opportunities Fund - $A Hedged Russell Global Opportunities Fund - $NZ Hedged Russell Global Listed Infrastructure Fund - $A Hedged Russell Global Bond Fund Russell International Shares Tracker Fund Russell Emerging Markets Fund Russell Conservative Fund Russell Diversified 50 Fund Russell Balanced Fund Russell Growth Fund Page 1

4 Russell High Growth Fund Russell II Portfolio Russell IV Portfolio Russell V Portfolio The Russell Pooled Superannuation Trust* Tower Buy and Hold Sector Fund TAL Australian Bond Fund Russell High Dividend Australian Shares ETF Russell Australian Value ETF Russell After Tax Australian Shares Fund (For Superannuation Investors) PartnerShip Conservative Fund PartnerShip Balanced Fund PartnerShip Growth Fund PartnerShip Debt Management Fund PartnerShip Income Seeker Fund Russell Multi-Asset Growth Strategy Fund * RIM is the investment manager appointed by the Total Risk Management Pty Ltd, the trustee of this Trust. The list of funds covered by this DRS may change (eg where new funds are established). An up to date list of funds may be obtained from RIM. RIM will update this DRS periodically or where there are material changes to the information contained in it. Objective of this Statement The objective of this Part A Derivative Risk Statement ( DRS ) is to summarise RIM s principles relating to the use of derivatives. This Part A DRS should be read in conjunction with the Funds Detailed DRS (Part B DRS). Derivatives are permitted to be used in the above Funds, subject to the Fund s investment objective, strategy, and guidelines, for the following purposes: To manage volatility. Interest rate forwards, futures, swaps and options are used to obtain/reduce exposure to segments of the bond and cash markets. Futures/physical arbitrage is used to enhance the performance of cash, bond and equity portfolios. Options, futures and swaps may be used to obtain/reduce sector exposure and/or stock selection in lieu of the equivalent physical security. Page 2

5 Options, futures and swaps may be used to create negative stock exposure in lieu of stock borrowing. Options may be used to generate income Currency risk is managed using currency forwards or futures. Futures or swaps are used to switch between market exposure and cash exposure. Derivatives (including forwards, futures, swaps and options) may also be used for hedging, risk control and to implement investment strategies. RIM retains the services of its related company Russell Implementation Services Inc. ( RIS ). RIM and RIS, are collectively referred to as Russell for the purpose of this Statement. Where Russell invests the Funds in derivatives, the relevant derivatives controls governing Russell s use of derivatives are set out in the Fund s Part B DRS prepared by Russell. A list of the types of derivatives that Russell uses in each Fund on a regular basis are set out in Schedule 1 Section A of Russell s Part B DRS. This list will be updated in the Part B DRS at least annually; however updated information may be requested by investors more frequently from RIM. RIM retains the services of several external investment managers who invest the Funds in or create exposure to derivatives. Alternatively RIM may use collective investments for investment by the Funds which use derivatives. Part B DRS or other information from each of these external investment managers or collective investments have been received. Overall Investment Objectives & Strategies The investment objectives and strategies of the Funds are documented in the Funds offer documents. A copy of these documents are available from RIM. Delegated Investment Managers RIM delegates a portion of the investment management of the Funds assets to external investment managers under investment management agreements. These agreements include the following: Investment guidelines that each manager is expected to observe. These guidelines are intended to limit specific risks within the portfolio and to help structure the underlying portfolio strategy as it relates to the overall investment strategy of the Fund. How investment instructions may be given by RIM to the external investment manager. The requirement that each manager must comply with the requirements of that manager s own derivative risk statement or other document. As RIM is a manager of managers, RIM may at any time, change investment managers for any of the Funds as part of its ongoing management of the Funds. An up-to-date list of investment managers and the area of investment strategy delegated to each manager is available from RIM. Where RIM makes changes to investment managers or material changes to strategies delegated to investment Page 3

6 managers, RIM will generally notify superannuation clients of these changes as soon as practicable after the changes occur. Russell s Internal Resources RIM delegates the management of external managers to Russell s internal staff. The responsibilities delegated to internal staff for management of external managers include the following: Initial appointment of the managers; Ongoing monitoring and assessment; Replacement of the managers, where required; Establishment of target weights for each manager; and Cash flow management, including allocation of new cash flow to managers in order to maintain the overall Fund structure. In addition, RIM may directly manage a portion of the fund s assets, the responsibilities delegated to internal staff with respect to these assets include the following: The implementation of equity or fixed interest overlays. Use of derivatives to obtain or reduce exposure to particular securities or segments of the market. Hedging of global currency exposures into Australian or New Zealand Dollars, where applicable. These responsibilities apply to certain funds listed under Section 1. Identification of External Investment Managers DRS Each external investment manager who is permitted to use derivatives is required to provide a DRS or other document to RIM. RIM maintains a list of the Funds current investment managers and the date of the most recent DRS or other document received by RIM. Copies of each investment manager DRS, or other document, can be requested from RIM. These documents may be updated from time to time and RIM will take reasonable steps to obtain these updates within a reasonable timeframe. Each investment manager that has issued a DRS or other document to RIM (if it has been trading derivatives) and confirmed to RIM that its DRS or other document is subject to an independent audit. Authorisation of Derivatives RIM has determined that the use of derivatives is permitted by the governing rules of each Fund. RIM is satisfied that the investment guidelines expected to be followed by each investment manager, in relation to the use of derivatives, are appropriate and consistent with the objectives and investment strategies of each Fund. Page 4

7 RIM has reached this conclusion as follows: RUSSELL INVESTMENTS RIM has reviewed each investment manager s DRS or other documentation to ensure the manager s approach to the management of derivatives is compatible with the role which the investment manager is required to perform under the investment management agreement guidelines. Where a DRS has been provided, RIM believes the DRS has been prepared in accordance with the requirements of the former Australian Prudential Regulation Authority (APRA) Circular II.D.7 Derivatives ( the former Circular ) for preparing DRSs. Where other documentation has been provided, in RIM s opinion it addresses the matters identified in the former Circular. No manager has informed RIM that the guidelines in the investment management agreement would cause the manager to operate outside of its DRS. RIM monitors compliance with the investment management agreement parameters on a regular basis. Authorisation of Part A DRS The Board of Directors of RIM approved this DRS on 10 March Page 5