AQR co-founder and CIO Cliff Asness talks to ISN about how social media might be making markets less efficient, the cloak and dagger world of alternative data, and why using machine learning means having to “let go of some things you cherish”.
The benchmarks that are supposed to measure performance and create alignment with end investors are working against asset managers, and the industry must find new ways to demonstrate value before it’s too late, according to MFS.
Why Mercer’s merger is a ‘game changer’
Mercer Super’s merger with BT’s Personal and Corporate super funds has created a $63 billion fund in a “momentous moment” for Mercer in the Pacific and a shake up for the post-Hayne superannuation landscape.
“I’d take this as a clear statement of intent for Mercer Super and its place in the industry,” says Kylie Willment (pictured), Mercer Pacific CIO. “We see the industry is ready for disruption and we have a really clear strategy to keep investing in (growth) for the benefit of our members and our clients. This merger really defines our competitive position and we’ll also want to make strong progress organically and look for other growth opportunities that enhance our scale and capability.”
Around 40 BT investment personnel have joined Mercer across investment management, operations, product, and risk and compliance. Around 350 BT employees have joined in other areas, while Corrin Collocott, formerly the CIO of BT, has also been brought on as CIO of merged entity and deputy CIO for the Pacific business, reporting to Willment.
“We see (the merger) as a game changer,” Willment says. “We’re able to bring the combined strength of scale with $63 billion of assets within Mercer Super itself. But one of the key differentiators for us is that Mercer Super and the Mercer Pacific investments business sits within an extraordinary global investment capability where we manage globally $345 billion, and that’s bigger than any other single super fund in Australia.”
Willment says that Mercer’s global footprint – 2,000 investment professionals and boots on the ground in investment centres around the world – is something “you don’t see anywhere else” and will give it an edge over the increasingly powerful industry fund segment, which has only just started to expand offshore.
“We’ve had, for a very long time, this bifurcation of (superannuation) into industry and retail funds, and there’s a perception that industry funds can deliver stronger performance with better fees,” Willment says. “The disruption opportunity that we see is that we’ve now got an offering that’s delivering really strong performance to our members at a price point that’s competitive with the best of the industry funds out there. We want to break down the long-held mindset that if you’re not an industry fund you can’t deliver great performance at competitive price.”
Your Future Your Super
While the recent changes to Your Future Your Super create more breathing room, Mercer, and every other super fund, are staring down the barrel of a significantly changed investment environment; one where inflation and interest rates are still rising, and geopolitical tensions are re-emerging after decades of relative peace.
“The question is where we can get incremental value add by taking active investment opportunities,” Willment says. “I do think in an investment environment that’s already volatile and likely to be more volatile as we look forward, it’ll also be a fertile environment for active management. So we’ll continue to pursue alpha opportunities in equities and within fixed interest, particularly what we’d describe as growth fixed income asset classes – high yield and emerging market debt, private debt. And within equities emerging markets and small caps can be really good places for alpha.”
“There’s a pretty big focus on the operating model as well. There’s an ever-growing understanding that investment businesses need to have the right people in the right place at the right time with the right information to make the right decisions, and that comes down to having an operating model that really supports that. So we’re putting a lot of time and focus on building out our tools, technology and team infrastructure to allow us to make good decisions and implement them in an efficient and effective way.”
