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Dig a little deeper

by Chris Cuffe

Third Link Growth Fund ( is a managed investment scheme which commenced in early 2008 and is now around $65 million in size.  It invests in Australian shares listed on the Australian Securities Exchange and is a fund-of-funds structure, meaning it invests in other Australian share funds managed by a selection of professional fund managers.  Investors pay a fee of 1.4% pa for their money to be managed in the Fund and applications are a minimum of $20,000.

On the surface, this looks like any other Australian share fund. But dig a little deeper and Third Link Growth Fund is anything but ordinary.

The investment manager of the Fund is Third Link Investment Managers Pty Limited (run by well know investment industry veteran Chris Cuffe).  All fees received by Third Link from managing the Fund’s investments, net of expenses incurred, go to support the non-profit sector.  Based on the current size of the Fund (currently around $65 million), this means if you invest $50,000 in the Fund you will effectively be contributing at least $600 per annum to charity, but without costing you anything.

So how is this achieved?  It stems from the extraordinary and generous support of a number of investment and service professionals who have agreed to waive some or all of the fees that would otherwise be due to them for services rendered. Instead, these waived fees are diverted, in effect, to the non-profit sector.

Third Link Growth Fund has just reached two historic milestones: celebrating its five year anniversary (an important point for the ‘legitimacy’ of any managed investment fund); and the accumulated donations to charity generated from the Fund passing $2,000,000.  In the September 2013 newsletter of the Fund, I made the following comments about its history and these milestones:

When I established Third Link Growth Fund in April 2008 I always hoped that one day it would be recognised for strong investment performance. However, as it was a new fund without a track record, I was conscious that investors in the early years were more likely to be attracted by the ‘philanthropic angle’ of the fund (I had committed to donating all management fees received from managing the Fund, net of expenses incurred, to the charitable sector).

Five years on from its launch, the returns to investors have been excellent. Even with the toll the global financial crisis took on all investment markets, Third Link Growth Fund has generated a return after fees of 8.8% per annum compound since inception to the end of September 2013. In addition to that, investors have enjoyed the benefit of imputation credits generated from franked dividends that passed through the Fund into their hands. This return is significantly greater than the benchmark that the Fund performance was being measured against – by over 4% per annum compound after fees. This result I believe, places Third Link Growth Fund as one of the best fund-of-funds in its class.

However, the icing on the cake for this unusual Fund is that it has generated over $2,000,000 in donations to the charitable sector. As the amount given to charities is directly linked to the Fund size, this has meant the amount being donated each year has been rising.  Based on the current Fund size of just over $60 million, we are now donating over $60,000 per month, placing Third Link in the top 100 charitable givers in Australia.

Thomas Jefferson once said “I like the dreams of the future better than the history of the past”. But to me, the achievements of the past provide a reality check of whether the dreams of the future are likely to be a reality one day. I have said from the beginning of this journey that I intended to close Third Link Growth Fund to new investors when it reaches $150 million, to preserve and maintain the innovative structure. At that point I expect the Fund will be generating over $2 million a year for charity, making it a powerful grant-making machine and providing a very material benefit to Australian society. I believe that target is no longer a dream, and word of mouth should see Third Link Growth Fund get to that size within a couple of years.

As at the end of February 2014, the Fund performance (after fees and assuming income distributions were reinvested; figures greater than one year are expressed as annual compound returns) relative to the Fund benchmark was as follows:

*As mentioned above, the benchmark up until the end of January 2012 was the Morningstar Multi-Sector Growth Market Index and from February 2012 onwards the benchmark was the S&P/ASX 300 Accumulation Index. These calculations are based on the performance of the old benchmark to January 2012 and the performance of the new benchmark from February 2012.

**The Third Link Growth Fund was established on 12 March 2008 (though it was not open for investment until 10 April 2008, being the date of the first PDS). Up until the end of May 2008 it was a requirement that application monies received into the Fund were kept on deposit as the unit price was held at $1.00. This restriction was removed from the beginning of June 2008, at which time the Fund was free to invest in accordance with its objective.The performance figures shown in this column are expressed as annual compound returns.

The underlying investment managers used, together with the particular fund of theirs invested in by Third Link, are as follows:

One of the key ingredients contributing to the good performance of Third Link Growth Fund, not understood by many, is that the underlying investment managers rebate their performance fees back to Third Link Growth Fund, in addition to their management fees.  Performance fees can have a big impact on the returns investors receive from a managed investment scheme.

The charities supported by from the fees generated are groups focused on helping young Australians thrive.  They comprise AIME (helping Indigenous students achieve education equality), Batyr (assisting to bring young people’s social and mental health issues out in the open), Beacon Foundation (helping prevent young Australians leaving secondary school from moving into unproductive or insecure pathways), National Centre for Childhood Grief (providing loving professional support and guidance for children grieving the death of a parent), Outward Bound Australia (helping young people to discover, develop and achieve their full potential), Rural Education Australia Program (helping community-based early childhood and education service providers in Australia’s rural and remote communities) and Children’s Ground (helping make a better future for indigenous children).  The ‘Our Charitable Partners’ section of the Fund website contains more information about these groups.

Third Link Investment Managers Pty Limited capitalises on Chris Cuffe’s industry knowledge, considerable contacts and many years of experience in the investment management industry in a unique way with the aim of providing both a competitive offering for investors and a valuable contribution to the non-profit sector. Chris is also supported by an experience group of advisors comprised of leading industry practitioners.

Published on: Thursday, March 20, 2014

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