Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Australia’s oldest super fund to bite the dust
The Harwood Superannuation Fund, reputedly Australia’s oldest super fund, is to be outsourced to a master trust or merged with an industry fund. The fund, for various CSR Ltd companies, dates back to the depression period of the 1890s. Tender documents and advice have been prepared by Deloitte.
The corporate fund is a complicated one, comprising five divisions, a mix of defined contribution, defined benefit and pensions and with various investment choice options. It has about $1.38 billion in assets and 13,000 members. The trustees have said that unless all their requirements are met, they will not proceed with any transfer and will keep the fund going.
The fund’s investments have been outsourced primarily to Russell Investments under an implemented consulting arrangement. Russell provides member administration through its alliance with Link Group’s AAS, which was announced early this year. There were also small legacy mandates with managers AMP Capital, Maple-Brown Abbott and Charter Hall according to last year’s annual report.
The fund was restructured over 2011-2012 following the sale of CSR’s sugar business. It has three sponsoring employers: CSR, Holcim and Sucrogen (the sugar business). The restructure was completed while the fund also adapted for the introduction of Stronger Super and MySuper regulations from this year.
While it is a worldwide trend for the sponsors of DB funds to try to exit that long-term liability, the massive regulatory change in Australian super over the past decade has accelerated the exit of corporates from the day-to-day management of their employees’ super.
