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.
Australian Ethical nabs investment heavyweights
Leading sustainable investment manager Australian Ethical has recruited a number of industry veterans for its investment committee as it enters merger talks with Christian Super.
Sean Henaghan, former CIO of AMP’s Multi-Asset Group and current CIO of Aurora Capital, will join Australian Ethical’s investment committee. Also joining are Sandra McCullagh, current non-executive director (NED) of the Investor Group on Climate Change and former NED of QSuper, who established the ESG equities research capability at Credit Suisse; and Steve Rankine, former head of asset management at Hastings and former managing director of debt capital markets at Westpac Institutional Bank.
“Australians are increasingly demanding ethical investment options from their advisers, fund managers, super fund providers, and other investment professionals,” said Australian Ethical CEO John McMurdo. “It is no longer acceptable for money managers to solely chase solid returns. We must also achieve solid returns through ethical means on top of delivering financial outcomes.”
“For this reason we have built on our 35 years’ experience as Australia’s pioneering ethical investor, by further shoring up the ethical pedigree of our investment committee and adviser offering. We hope to help more advisers take full advantage of the surge of interest in responsible and ethical investing that is accelerating flows of our funds.”
Since the end of his post-AMP sabbatical, Henaghan has been focusing on building out Aurora Capital, a sustainable KiwiSaver scheme that emerged from financial advisory group Aurora Financial, which was founded by Simon Rolland in 2016.
Two of Aurora Capital’s products invest into underlying funds managed by NZ-based Mint Asset Management, while the third – the Future Focused Fund – invests in BlackRock ESG ETFs selected for their exposure to “key components of a sustainable future”: clean energy, water, and timber.
Henaghan and Rolland viewed that strategy, along with other measures that Aurora Financial has taken, as the key to being viewed as “authentic” at a time when consumers are increasingly sceptical about the green credentials of investment managers
“I’d love it if all our KiwiSaver competitors said “Yes, this is a good idea and we’re going to do it too”. I’d see that as a win rather than a threat,” Henaghan said in October 2021. “Every year that passes where we make less progress just means that the pain is going to be all that worse when we’ve got to sort it out… It really is quite unbelievable that as a species we’re completely walking into this and not taking it seriously enough. It’s terrifying.”
The appointments follow Australian Ethical’s recent hire of Angus Dennis from Vanguard Australia as investment director leading the institutional channel strategy, and come as it enters into merger talks with Christian Super that could create a combined entity managing some $9 billion and serving around 100,000 members across the country.
The merger is one of the more obvious tie-ups in a post-YFYS world, and answers some of the lingering questions about the fate of faith-based super funds that have fallen prey to the performance test. Australian Ethical chairman Steve Gibbs said he was “delighted” by the opportunity to merger with Christian Super, which he viewed as “an endorsement of our purpose and investment philosophy”.
