Systemic risk in the superannuation system likely doesn’t stem from funds themselves, but from their service provider relationships. Regulators need to be thinking harder about where and how it arises – something they’re not necessarily well set up to do.
Big asset owners and managers are embracing the private markets as one avenue for growth, but the complexity that brings to portfolios means they also need to get a better view of what might be decades of siloed information.
DFA’s new model for member-directed options
Dimensional Fund Advisors is speaking with a number of super funds about its Managed DC platform that will allow funds to create investment options for individual members rather than maintain the current one-size-fits all.
The Managed DC option was designed by Nobel Prize-winning academic Robert Merton – resident scientist at Dimensional and professor of finance at the Massachusetts Institute of Technology Sloan School of Management – and is already being used by clients in Europe and the US.
Dimensional Australia is a wholesale funds manager. Its Managed DC product manages the investment strategy and asset allocation at an individual level, and can manage all the asset exposures, or just the riskless or bond exposures.
“So we will manage the riskless asset and we want the fund we are dealing with, who probably has a CIO and probably has highly developed skills in selecting equity strategies for their members…We want them to go and really do that well,” Tony McFadyen, regional director, retirement solutions, says.
“It [the Managed DC system] aggregates all of those buys and sells for every individual and what those contributions would be for all those individuals and it comes back up to fund levels,” he says
The product aims to manage the individual outcomes for members but to aggregate the process in order to keep it in a scale environment.
McFadyen said the option could be more appropriate for mid-size or smaller superannuation funds. Many larger funds, like QSuper and AustralianSuper are already working on their own options with QSuper touting theirs as “much more than a target-date fund”.
“You could use this investment process aimed at an individual’s income for a defined benefit fund,” he says.
 “A lot of those defined benefit funds are quite large and there are some that small, a few thousand members, and our Managed DC process could help manage those exposures too.”
