Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Despite authorities taking their foot off the environmental, social and governance pedal and recent volatility in equities and bonds, the benefits of Artificial Intelligence and improved investor transparency are just beginning.
Investment insourcing: ‘no right or wrong answer’
(Pictured: Jonathan Green)
What’s new about the insourcing discussion, according to Lounarda David, head of investment operations at Sunsuper, is the pace at which it is going on. She warned that doing an assessment of benefits was relatively easy, but getting out if it doesn’t work might be very costly.
The session on insourcing at the Fund Operations Summit garnered the views of David, who was the long-time head of Mercer Sentinel prior to joining Sunsuper this year, alongside those of Dharmendra Dayabhai, UniSuper’s head of portfolio analysis and implementation, and Jonathan Green, NSW T-Corp’s head of investment management. It was chaired by Rohan Singh, Northern Trust managing director Australia and New Zealand.
David said the big agenda items were costs and performance. “You can make substantial cost savings but funds are also looking to have better governance and control,” she said. “Other organisations are looking to be more creative, to think outside the box… Insourcing means different things to different people.”
UniSuper’s Dayabhai said, for instance, his fund had strong views about ESG and that insourcing had helped them implement those views. “We gained the benefit of extra knowledge and access to senior management… It’s a no-brainer on costs. Everyone can do the maths.”
He said that UniSuper had expanded its product range as a result of insourcing as well. “Our single-sector products are very attractive to our pensioner clients. We’re developing a new one: global companies in Asia.”
T-Corp’s Green said there were no right or wrong answers to the fundamental questions around insourcing. For T-Corp it was an evolution rather than revolution. He said that for his board, cost savings didn’t come into it.
“The three main areas for us to look at were: strategic benefits; operational considerations and risks; and investment outcomes… But it has been cheaper. What we’ve really done is internalise the managers’ profit margins.”
He said a benefit you might not think about was the possibility of “creativity enhancement” because the internal team did not have to think about developing a product which they needed to sell to other people. This meant a closer alignment with the members’ interests.
David added it was “important not to get too emotional” about the decisions to be made. “You have to keep on reminding yourself what you’re doing is for the members, which is easy enough to say but not so easy to implement. The DNA of a super fund is very different from the DNA of a fund manager. At some stage, they have to come together.”
