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Q&A with Roger McIntosh, Head of Investments at LUCRF Super

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Roger McIntosh

Roger McIntosh, Head of Investments at LUCRF Super

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. ]

GIC Sells Arizona Biltmore to Blackstone

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Blackstone Real Estate Advisors, part of the Blackstone Group, acquired the 740-room Arizona Biltmore hotel, located in Phoenix, for US$ 403.4 million. The deal closed on April 20, 2018.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Mubadala Acquires Stake in Growing Hedge Fund Phoenician Capital

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Mubadala Investment Company, through its unit Mubadala Capital, purchased a minority stake Phoenician Capital, LLC. Although terms and size of the deal were not disclosed, the agreement grants Mubadala Capital rights to invest in a fund managed by the New York-based firm, which generated respective returns of 40.8% and 33.0% in 2016 and 2017, against benchmarks of 12.0% and 21.8% for the S&P 500. The hedge fund runs the Phoenician Offshore Fund Ltd.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Large Asset Managers Continue to Move Operations Out of California

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In the 2010s, Fisher Investments, an investment firm run by Ken Fisher, moved a large number of employees from the Woodside and San Mateo campuses to a town called Camas in Washington, near Portland. Vanguard has a large operational presence in Arizona, while Charles Schwab Corporation has expanded its technology operations and client services in places like Denver, Dallas, Austin and Phoenix. Dimensional Fund Advisors moved its headquarters in 2008 from Santa Monica, California to Austin.

While asset managers reap profits and try to lower employee head count costs, looking to fly-over country seems appealing.

The Pacific Investment Management Company (PIMCO), part of the Allianz family, selected Austin, Texas as its new office to hire more client services and technology talent. The PIMCO Austin office will open later in 2018. PIMCO is headquartered in Newport Beach, California, with an office in New York City.

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