Stories of success for in-house investment management abound in Australian and New Zealand superannuation funds. David Rowley reports.
“We set up an internal treasury team and in-housed our cash management, currency overlay and equity overlay programme. This was key in our use of derivatives.”
David Iverson, NZ Super
After a five-year period that has seen many funds take their first tentative steps to manage domestic equity portfolios, there is growing confidence. UniSuper, the Australian equivalent of USS, runs half of all its AU$50bn in assets in-house, mostly in domestic assets. On its website it boldly explains these activities to members as: “external investment managers have little comparative advantage [in these areas]”.
After some hostility from the local fund management industry, who in part have been fearful of their best ideas being nicked by in-house teams and incredulous at such bold statements, there has come begrudging acceptance. AustralianSuper, the country’s largest public offer fund, has assured fund managers that as long as its total
assets grow, then allocations to both external investment managers and internal investment teams will grow too. It plans to have around 50% of assets managed inhouse by 2020 and in doing so reduce its fund management costs from 60bps to 45bps.
Kevin O’Sullivan, chief executive of UniSuper, has also assured the fund management industry that his fund has no target to increase the proportion of assets in-house.
“While volumes are likely to grow in existing in-house strategies, there is no current intention to expand the scope of activities,” he says. “Specialist strategies requiring large teams involved in fundamental analysis (for example small caps, global credit, high yield, regional, sector specific, etc.) will continue to be outsourced.”
