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.
AustralianSuper creates big data team
(Pictured: Paul Schroder)
AustralianSuper has completed the hiring of a strategy, performance and analytics team within the trustee office to better harvest and integrate the fund’s data sets.
Paul Schroder, group executive membership, was excited about the calibre of the team and said its formation was the first step in understanding how the collection and integration of data across the fund could be used in better communicating with, and creating product for, members.
On the team is Rohit Mendiratta, previously at Westpac Banking Corporation, Peter Coburn, an internal appointment from AustralianSuper, Dushyant Chauhan from Deloitte and Dan Patrick To from Medibank Private. There are two contractors also currently on the team who will be replaced with full-time employees.
“We’ve got this incredible relationship with members and businesses. We have yet to harness what we already know. At the heart of that is being able to integrate all those data sets,” he said.
The team has been working on the segmentation of members and whether or not their behaviours and attitudes can be reliably understood and recorded.
“[We’re] trying to find reliable ways to identify people based on basic data…but then going to behaviours and then, much more importantly, going to attitudes,” Schroder said.
“The thing that were trying to unlock, and which is very revealing, is that it seems likely that there are style of people or attitudinal sets that are unrelated to your age or your balance.”
The segmentation is currently being tested but the initial results suggest that there may be five segments, an example of which could be an “independent controller”.
It wouldn’t matter what age, or fund balance such a member had, if they were the style of person that wanted to control things, they would always be more interested in a products that targeted that behaviour.
AustralianSuper is currently collecting and integrating data from custodians, members themselves, call centres and the administrators. Behaviours such as how often someone contacts the fund and what they ask about, may be tracked and used to help identify what kind of segment a member falls into.
“We get the importance of data. The central job we’re doing now is integrating all of the data sets that are at our disposal, identifying the gaps and that’s being driven by a brand new team,” he says.
At CMSF last week Schroder also gave the latest numbers for AustralianSuper’s member-directed investment option (MDIO) strategy, as reported by ‘The Insto Report’ newsletter. While the numbers are still small, the interesting thing is the proportion of new members, rather than existing members, who have taken up the MDIO. This is possibly an early sign that these strategies are not only helping to retain members who might otherwise be lost to the SMSF market, they are also attracting new members.
Schroder said that of the 3,318 members who took up the MDIO option over the past 12 months, 686 (20.7 per cent) were new members and 2,631 were existing.
The newsletter also reported that AustralianSuper was examining how to allow in-specie transfers of assets into the MDIO, which is complicated by taxation and technological issues.
