Expanding OneFund

In August 2024, the OneFund initiative was born, bringing together several NSW investment funds to create a $47bn OneFund. Can you describe the process and the funds involved?

Ali: OneFund is an initiative of the NSW Government, announced last year, which initially brought together six separate state investment funds to be managed as if they are a single fund.The first step was to set the long-term strategic level of risk and return that is appropriate for OneFund. The NSW Government took a whole-of-state perspective, considering the diverse nature of its long-term requirements in areas such as infrastructure in regional NSW, insurance for government property assets, and insurance for government employees’ work-related injuries.

Participating investment funds include the NSW Generations (Debt Retirement) Fund, NSW Infrastructure Future Fund, Social and Affordable Housing Fund, Snowy Hydro Legacy Fund, Treasury Managed Fund and Long Service Corporation Investment Fund.

In March 2025 OneFund was expanded. Tell us about the additional funds added and how this grows the OneFund Portfolio?

Kathryn: The Lifetime Care and Support Authority Fund and the Workers Compensation (Dust Diseases) Fund, which had previously been standalone portfolios, were consolidated into OneFund.

The Motor Accidents Injury Treatment and Care Benefits Fund has been invested in the TCorpIM Long Term Growth Fund and the TCorpIM Medium Term Growth Fund. It redeemed those holdings to invest its capital in OneFund. Combined, these funds added $12bn to OneFund. After the consolidation and strong investment performance, OneFund had $64.5bn in assets under management as at 30 June 2025.

What is OneFund’s performance objective and how are you tracking in the first year?

Kathryn: The OneFund investment objective is CPI + 4.5% per annum over rolling 10-year periods. From its inception on 31 August 2024 to 30 June 2025, it gained 9.2%. That performance exceeded the investment objective by 3.2% and generated $5.1bn of value.

The outperformance was driven mainly by the rise in share markets. Returns from the share market drove more than half of OneFund’s gain. The remainder was driven by strong performance from TCorp’s other investment strategies, including management of currency exposures – reduced exposure to the US dollar was helpful – and investments in unlisted assets, such as property and infrastructure in developed markets outside of Australia.

TCorp works hard to build a portfolio that can participate when share markets are strong as well as defending value in tougher times.

While this return represents a good start, we are focused on delivering a portfolio that maximises the probability of achieving our performance objective over the longer term.

To date you have brought together nine separate funds into OneFund. Why is this a better way to manage the state’s capital?

Kathryn: The primary benefit of establishing OneFund is to deliver higher risk-adjusted returns overall. Pooling the investment portfolios creates greater scale in OneFund. That scale and consistency of approach, driven by the NSW Treasurer’s criteria, enables a higher risk appetite by increasing the capital available to fund required outflows at any given time. A higher risk appetite drives higher returns. The scale also enables TCorp to pursue assets and strategies that would not be available to smaller funds.

Another benefit of establishing OneFund is greater operating efficiencies, which reduces the overall cost of delivering the investment services.

What measures are in place to ensure OneFund continues to meet its performance objective during market disruptions?

Ali: OneFund is invested in a diverse portfolio of assets, including global shares, so its value can fluctuate in the same way as superannuation funds. TCorp seeks to significantly reduce fund volatility relative to global shares by using its size and scale to invest in diversifying assets.

By adjusting the investment strategy of OneFund to be resilient to a variety of stressed market conditions, this enables us to better diversify the risk assets with our defensive strategies.

We do not know what type of event will cause the next market disruption, so we deploy multiple strategies to improve OneFund’s resilience to ensure delivery of long-term objectives. We believe in preparing for potential market scenarios rather than predicting any one of them.

Defensive strategies are used across TCorp’s total investment portfolio, including OneFund. Why is it necessary to hold these levers in portfolios?

Ali: Defensive strategies are important to diversify the risk drivers in the portfolio. Defensive strategies typically perform well when markets fall. These strategies include exposure to foreign currencies or derivative instruments. Defensive strategies are then incorporated into portfolios and sized depending on the client’s need.

For clients with high cashflow needs, defensive strategies can be an important source of liquidity. When market events occur (such as Liberation Day in April 2025 when President Trump announced reciprocal tariffs) the positive returns from the performance of defensive levers can be used to fund client cashflow needs.

For clients with high cashflow needs, defensive strategies can be an important source of liquidity. When market events occur (such as Liberation Day in April 2025 when President Trump announced widespread tariffs) the positive returns from the performance of defensive levers can be used to fund client cashflow needs.

For clients without cashflow needs, defensive strategies can provide liquidity in stressed market events so TCorp can better manage total portfolio risk and potentially buy assets at attractive prices.

Our Investment Management team is constantly focused on testing our assumptions relating to the risks that portfolios are exposed to and the most appropriate way to manage those risks. This results in a combination of evolving defensive levers that allow us to better manage the Portfolio’s total risk.

What are the future plans for OneFund?

Kathryn: We believe the investment strategy for OneFund is well placed to deliver the investment objective and stay within the risk tolerance set by the NSW Treasurer. In its first year, OneFund benefited from strong equity markets and demonstrated resilience through volatile periods. That’s a good start.

Looking forward, we are focused on making incremental improvements to the quality of the portfolio to keep driving high risk-adjusted returns. For example, we will continue adding assets and strategies to the portfolio that offer high returns without relying heavily on share markets. These include unlisted infrastructure and some private credit.