Australian super funds bring it home
of Australia’s large superannuation funds are bringing more of their investment
management in-house as part of efforts to reduce costs and increase control
over their assets. The Telstra Super fund, Australia’s largest, recently
established an in-house fixed income desk utilising trading technology provider
Charles River’s Investment Management System (IMS), which it was already
deploying for equity and money market instruments.
compulsory superannuation contributions by employers were mandated in 1992,
currently set at 9% of wages, the Australian fund management sector has
experienced a major expansion, boosted by further voluntary contributions from
workers. The country now has one of the highest levels of managed
funds per capita in the world.
“While fund management
has historically been handled by traditional asset managers, we are seeing a
growing trend by super funds in Australia seeking to benefit their
organisations and their clients by bringing portions of their funds management
in-house,” Cameron Field, managing
director, Asia Pacific, told theTRADEnews.com. “Super funds are
enhancing their competitiveness by bringing in-house the investment strategies
they feel they can add the most value to for their members. This has an added
benefit of reducing administration and management expenses that can also be
passed back onto clients in the form of fees.”
the operations in-house gives super funds the ability to take a holistic view
of their portfolios and funds, rather than having to aggregate information from
multiple providers, which can often be a cumbersome and time consuming process.
"The flexibility and
scalability of Charles River IMS meant we could expand our range of investment
products, increase the amount of funds managed internally and reduce the
administration expenses traditionally associated with multiple managers,” said
John Eliopoulos, head of Australian equities at Telstra.
recent years, super funds like Telstra Super, which manages more than
AUD$11billion for more than 100,000 members, have also begun to look to diversify their
direct investment strategies into other asset classes such as fixed income,
according to Field.
deploying a multi-asset, multi-currency investment solution, super funds can
easily and quickly set up new trading desks in alternative asset classes and
leverage best practices on workflows and configuration improvement from their
technology vendor,” added Field.
trend of bringing more of the management in-house rather than outsourcing everything
to a third-party investment manager, is one that is likely to continue,
believes Field, though he doesn’t see it happening across the entire industry
nor across all asset classes.
as potentially bringing down costs, including management fees and those for entering and exiting external
funds, it also enables super funds to tailor mandates to their own specific
management in-house also presents its own challenges in terms of both
infrastructure and personnel needs.
need to consider, “technology, integration, integration with the trustees,
custodians, fund administrators, third parties, compliance and regulatory
reporting as well as the more obvious internal IP that is required to manage
those direct investments,” suggests Field.
“When you look at the
in-house teams that some of these fund houses have built up and the experience
behind the personnel within them it’s very clear to see there is an appetite to
bring more of this management in house in the future,” he adds.