Turnbull's wide-ranging fortune

PORTFOLIO POINT: The investment portfolio held by Malcolm and Lucy Turnbull is more like an institutional fund than a DIY super account.
Malcolm Turnbull, the Federal Member for Wentworth and Leader of the Opposition, is a man comfortable with complexity and large numbers, if his register of investments is anything to go by.

Since the beginning of his parliamentary career Turnbull has been director of no less than 27 companies and has held interest in literally scores of investments across equities, property, bonds, debentures, private loans, hedge funds, stock, land and cash products. The Turnbull portfolio is, in fact, more akin to an institutional fund than a DIY super account.

These days, according to submissions made to parliament’s Register of Pecuniary Interests, he is a director of just nine companies and has sold many of his listed investments. It is understood that his wife Lucy Turnbull now runs the investments as Malcolm engages in a parliamentary career.

Malcolm Turnbull's fortune was made near the height of the dotcom boom when, along with partners including Sean Howard, he sold OzEmail to MCI Worldcom for $60 million. The Turnbulls’ interest in IT has not waned, however, and not only is he parliament’s greatest proponent of online social networking tools such as Facebook and Twitter (ask your kids). The Turnbull family is a big investor in domain name registration firm Melbourne IT Ltd (MLB), of which Lucy Turnbull is a non-executive director.

Melbourne IT has been a stalwart of the Turnbull portfolio since September 2006, when it merged with the then-listed WebCentral. Both the Turnbulls were once directors of WebCentral, which like OzEmail was an internet host. On November 27 and December 1 this year Lucy Turnbull purchased an additional 155,995 Melbourne IT shares at $1.72 and another 44,005 shares at $1.81 on market.

When Malcolm was elected to parliament in October 2004 he held shares in ANZ, CBA, BHP, Goldman Sachs in New York, Tabcorp Holdings, biological storage company Cryosite (CTE), Fortescue Metals and AWB. He also had direct or indirect interests in a further 15 publicly listed companies in Australia and Britain, plus a dozen or so private companies, more than 10 managed funds and a smattering of derivative investments, not to mention his famous Point Piper mansion, although back then he didn’t own the adjoining property.

Some of his more interesting holdings at the time included shares in the Gurnsey-based Eurocastle Investments hedge fund (he sold out of this just before things went really bad for the industry in mid-2008) and the privately held Australian Aviation Investments, which he sold out of in 2005.

These days besides IT interests, the portfolio has gone through many changes, but it is still fascinating for pundits and investors alike. What’s out are most of the blue-chip shares, a swathe of the private companies and many of the hedge funds; what’s in are extra holdings in cash (deposited with no less the nine different banks), some presumably contrarian investments in property funds and that second Point Piper residence, plus some extra property investments in Potts Point, Paddington, Canberra and again in Point Piper.

Some of the more intriguing newer investments are in bonds, an asset class that many expect will significantly outperform equities and cash both here and internationally in 2009. MB Turnbull Pty Ltd holds corporate bonds in Griffin Coal Mining – an unlisted producer in Western Australia – alongside World Bank bonds and State Bank of India hybrid perpetual instruments.

The Turnbulls' Wilcrow Pty Ltd also has holdings in the AMP Capital Structured High Yield Fund, the Vanguard Australia Fixed Interest Index Fund and the Vanguard International Fixed Interest Index Fund.

Held by the superannuation fund trustee Pokana Pty Ltd are interests in Magellan's flagship index fund, the EQT Intrinsic Value International Sharemarkets Plus fund and the Platinum International Fund. Turnbull was not available to comment for this article, but clearly he and Lucy along with his advisers believe in the long-term viability of emerging markets and international equities.

From his submissions to parliament, Turnbull’s investment approach appears to be long-term. While the portfolio changes from year to year, most securities are held over multiple reporting periods. The exceptions have been, in recent time, with Babcock & Brown and Macquarie Group equities. Lucy Turnbull bought into and sold out of Macquarie between September and October this year, while between May and July Turnbull & Partners Holdings Pty Ltd, the private investment bank, bought and sold shares in BNB. Babcock & Brown subordinated notes (BNBG) are still held however by Turnbull & Partners Pty Ltd.

In July this year, Lucy Turnbull made another contrarian buy for CBA, ANZ, NAB and the Pengana Global Resources Fund. Pengana Capital, of which both Turnbulls have been directors, is managed by Russel Pillemer, who used to work with Turnbull at Goldman Sachs. Even Turnbull’s children own shares in another Pillemer company, Rubicor Group (RUB), a recruitment services company.

Unfortunately for Lucy Turnbull and Pengana, however, the company hasn’t been completely immune from the financial crisis, with the Global Resources Fund, for example, down 32.5% for the year to November 30 despite having produced a whopping 50% return in its first 12 months since inception in March 2007.

Like other wealthy investors, the Turnbulls have no doubt experienced losses across many other holdings this year, but there are still instructive lessons to be gleaned. Malcolm and more recently Lucy Turnbull generally buy and hold, but they do not do so indefinitely, continuously adding and removing holdings across securities and asset classes. What emerges is that they are thematic investors, who, while holding a long-term view, take market conditions, trends and changes into account.

A portfolio as complex or as large as the Turnbulls’ is something that most of us can only dream of, but with an intelligent and multi-asset approach to investing – balancing the need to ride market changes but also avoid portfolio churning – most investors can do quite well in the medium to long term. Take periodic reviews of your portfolio; avoid the temptation to trade outside a thematic or strategic framework; and don't be afraid to set your sights beyond shares and property, but make sure you understand your investments.

Who knows? Maybe one day you too may own adjoining houses right on Sydney Harbour.