This interview will appear in the 2Q Y2014 (July 2014) Superannuation World issue of the Sovereign Wealth Quarterly.
This is a Q&A with Roger McIntosh, Head of Investments at LUCRF
1. In the past five years, how has the Australian superannuation investor class evolved when it comes to institutional investing?
There has been an increasing level of sophistication in developing, implementing and evaluating strategies across all asset classes. Superannuation investors are more critically appraising the suitability of a manager’s approach in a whole-of-strategy context, not just in isolation. Investment managers are trying to align with superannuation investors’ strategy and aiming to position themselves as investment solutions implementers, rather than just providing products. The increased reporting and governance requirements in the regulatory regime has also increased the level of knowledge and importance of investment risk as a primary input into the construction of investment strategies and required enhanced investment risk management systems and processes.
Having a statement of ESG beliefs and incorporating this as part of the investment process is important as companies who better manage ESG issues will provide opportunities for enhanced long term investment performance.
2. Many U.S. public pensions heavily rely on external managers; do you see more of the large superannuation funds bringing investment capabilities internally or the reverse?
There will be some continuing increase in internal investment management, but the majority of funds will continue to rely on external managers.
The factors that lead to internalisation will be Fund dependent: the quality and experience of the investment team leadership; the degree of interaction and trust from the investment committee; an appropriate risk management framework and an objective performance measurement framework. Bringing investment management in-house cannot be justified purely from a cost basis as there has been long term pressure on investment managers fees to decline.
For larger funds, there is more movement towards increasing internal investment capabilities because of a perception of manager capacity constraint, particularly within the domestic equity market. The challenge will be ability to attract and retain sufficiently skilled staff in a competitive environment, not just front office staff, but the middle and back office support functions. I believe there will be a more hybrid approach with some functions managed internally based on strategy, research and asset selection and increasingly sophisticated control of tailoring portfolio exposures in conjunction with external managers implementing more customised strategies.
3. When selecting investment managers and partners, what criteria are essential to you?[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
The Abu Dhabi Investment Authority (ADIA) is seeking to sell the building that houses the headquarters of the Korea Investment Corporation (KIC). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
The Bank of Montreal (BMO) and the Ontario Teachers’ Pension Plan (OTPP) participated in a landmark blockchain Canadian-dollar debt transaction. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
Just Group plc acquired a 75% ownership stake in the holding company of Corinthian Pension Consulting Limited (Corinthian Pension Consulting). Operating in the institutional world for over 12 years, Corinthian Pension Consulting provides advisory services to defined-benefit pension scheme trustees and scheme sponsors undertaking bulk scheme exercises. The remaining 25% will be retained by current shareholders of Corinthian Pension Consulting. Robert MacGregor will continue to lead Corinthian Pension Consulting, as its Chief Executive Officer. Furthermore, Corinthian Benefits Consulting Limited and Corinthian Affinity Solutions Limited will continue to operate as before, becoming part of a newly formed holding company, Corinthian Group Holdings Limited.
2 weeks ago
Saudi Sovereign Fund Buys Big Stake in Tesla
4 weeks ago
SWFI First Read, July 25, 2018
2 weeks ago
PGGM Acquires Solar and Wind Assets in USA
2 weeks ago
New CFIUS Could Impact Private Equity Raising and Profits
3 weeks ago
DEEP DIVE: CPPIB Makes its Case for Core Infrastructure
1 week ago
Pipeline Politics Entangles US, Qatar, and China
3 weeks ago
Hong Kong Monetary Authority Reveals Life Annuity Scheme
1 week ago
Puget Sound Energy is now Majority Owned by Public Pensions