Page 2 - SMA changes rationale_Best of Breed Moderate
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Restructuring Infrastructure Assets

               Why we are making the change

               The current property / infrastructure portfolio only carried an exposure to listed infrastructure, and
               not listed property, given our greater conviction in infrastructure historically. However, our outlook
               for the listed property sector has improved as cash rates have peaked and the economic backdrop has
               not been as negative as originally expected. Most of the larger listed property companies have low
               levels of leverage and/or do not have debt due for some time, which means they have locked in low
               borrowing costs. We have reduced the listed infrastructure exposure in the portfolio to enable the
               inclusion of listed property exposure, at equal weighting, while maintaining the overall allocation
               here.



               Currency Hedging

               Why we are making the change

               We currently have an unhedged position when it comes to currency on our global growth asset
               portfolio. Over the last few years, and more so of late, there has been significant currency movement.
               We believe the Australian dollar remains undervalued versus the US dollar and some other currencies
               in comparison to long term historical averages. Given the relative strength of the Australian economy
               and the likelihood foreign central banks will cut their cash rates before the RBA, there is likely to be
               upward pressure on the Australian dollar moving forward. We felt it was prudent to include some
               currency hedged exposure in the portfolio via global listed property and infrastructure, thus leaving
               global equities unhedged for now.



               Changes to Underlying Investments

               Why we are making the change

               We have reviewed the underlying holdings to ensure the portfolio continued to contain our highest
               conviction picks and their associated blending (portfolio construction) remained appropriate
               considering our expectations of the forward period. This review resulted in the following changes to
               the investment lineup:
               Bennelong Twenty20 Australian Equities – Sold – our conviction has softened a little here given
               interactions with the manager over the last 12 months or so, with less transparency / openness than
               others in the peer group making it more difficult for us to maintain and/or increase conviction.
               Solaris Core Australian Equity (Performance Alignment) – Sold – our conviction has softened here
               over the last 1-2 years where we felt the manager’s stock conviction had softened whilst our
               conviction in other managers rose strongly.
               Warakirri Concentrated Australian Share – Bought – our conviction here has increased to levels
               warranting portfolio inclusion. We like the best ideas approach and the long tenure of the team and
               process. We also like the quality style bias and the multiple portfolio manager approach, with a highly
               experienced team encouraging accountability and constructive debate.
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