Bigger isn’t always better when it comes to member services. Megafunds might be able to mass customise, but when you’ve got two million members it’s tough to bring the personal touch.
The famous and closely watched US endowment model took a hit in FY23, with smaller, equity-heavy investors taking the lead. But the longer-term superiority of a chunkier exposure to alternatives remains unchallenged.
Rest takes another step on the internalisation journey
Rest will expand its line-up of internal investment strategies with the creation of a new global equities function and has appointed Richard Mercado, a former “high-conviction portfolio manager” at the Paris-based Comgest, to head up the effort.
“We are committed to continuing to deliver strong long-term returns and keeping our fees as low as possible. Our Core Strategy investment fees and costs for the 2022/23 financial year were the lowest they’d been in recent years,” said Rest CIO Andrew Lill.
“Using our scale and expertise to build further internal capability aims to help us realise further value for our members. This is another demonstration of the continued evolution of Rest’s whole of fund approach.”
At Comgest, Mercado was a portfolio manager on five global equity strategies, the largest being the A$1.4 billion Comgest Growth Global fund. His career began in Australia, with roles at Macquarie, AMP Capital and the local outpost of Dutch bank ABN Amro. Prior to Comgest he was a senior portfolio manager responsible for a North American equities fund at the University Superannuation Scheme, the United Kingdom’s largest pension fund at around A$144 billion. At Rest he will report to head of listed assets Kiran Singh.
Rest began its internalisation journey in a slightly different place to other funds. Rather than having to build new capabilities from scratch, it was instead able to integrate its wholly-owned subsidiary investment arm Super Investment Management (SIM) into the fund proper in 2019, with Lill hired around the same time. SIM was originally focused on property, cash and fixed income, but expanded into infrastructure and built an Australian equity capability.
In a mid-2022 interview with i3, Lill said that Rest managed around 15 per cent of its listed assets internally with board approval to get to 25 per cent by 2025. In his new role, Mercado will implement an active, fundamental stock-picking strategy as a part of Rest’s broader, ongoing journey to internalise certain investment strategies.
“We’ve found that internal management can provide additional benefits and insights to complement the work we do with our external managers,” Lill said. “This gives us a more holistic view of how companies are contributing to our overall portfolio and our sustainability goals.
“Richard’s proven track record makes him ideally suited to help develop and lead our new internal global equities capability. He adds further depth and knowledge to the expertise we’ve been building within our investments team in recent years. We are delighted to welcome Richard to the team and back to Australia after many years abroad.”
