He then joined the Active Funds team at Myer Family Office and then realized that his skills lay in the index and the quantitative side.
In 18 years, IFM Investors has become globally recognized for its environmental, social and governance (ESG) credentials.
It competes on the world stage with the largest investment firms and its infrastructure fund is one of the largest in the world with more than 500 clients and $83.8 billion invested in airports, services utilities, roads and ports in Australia, Europe and the United States.
But its growing size and influence are challenging Australian business power dynamics
While the IFM was born and is still collectively owned by the union-aligned funds of the 1990s. But Mr Puddy says he has never heard from current chairman and former Labor government minister Greg Combet or the former president Gary Weaven marry the unions or the labor party.
“What they’ve done – and it made a big impression on me – is they talk about who we’re handling the money for and that’s millions of Australians,” he said. he said in a recent interview at the IFM offices in Melbourne.
“From my point of view, we are apolitical.”
While ESG investing has become hugely popular, particularly in relation to climate change, IFM’s long-term horizon means it has held these core beliefs for 17 years.
“Sustainability is about maximizing profits, but that may not be immediately obvious,” he explains.
“If you don’t live up to the social license given to you, that social license may cease to exist in the future and I would say that would have a very negative effect on profits.”
Of the $45 billion overseen by Puddy, $32 billion is Australian indexed stocks.
He calls his index product “passive enhanced” – holding all the stocks in a benchmark, but tinkering with the weightings just enough to outperform. . The fund would be in trouble if it performed too well, he said, “because that would indicate that we were deviating too much from the benchmark”.
IFM now has around 580 employees and brought in $530 million in management fees in 2020-21, mostly from the infrastructure fund. The publicly traded equity team received fees of $10.2 million, according to its most recent annual report filed with the corporate regulator.
Puddy believes MFI mandates are earned on merit by offering lower fees, research, a strong balance sheet, customization and bespoke products like low-carbon portfolios.
IFM only reports its performance to the 22 super funds that own it. But Puddy says its products have outperformed over the long term. “We have done what we consider to be an excellent job for our clients and their members.”
As his funds increase, so does his power.
“The bigger you are, the more business impact you can have,” he says. “It’s good that you can be listened to.”
That power is exercised during annual general meeting season, with the IFM voting against 134 resolutions at 237 general meetings last year, typically on increases to attendance fees and executive pay.
Andrew Curcio, PwC partner and global co-leader in rewards and benefits, says boards are engaging more with super funds to secure their support.
“While the average number of votes against the compensation report remains below 10%, the number of extreme votes against tends to increase,” he said. The largest “no” votes in 2021 were against Dexus, Link Administration and Rio Tinto.
“As part of this, we are seeing much more engagement with pension funds directly in recent times, recognizing the level of interest and influence they now have on these issues,” he said.
Puddy also recognizes that the IFM owes its growth to its performance but also to government policy, which guarantees an ever-growing pool of retirement savings.
“We don’t lose sight that there is a super guarantee in Australia, and so we have to respect the social license that has to exist because of guaranteed entries,” he says.