An ASIC report notes the boom in demand for this asset, saying it heightens the need for “better-quality data” about the size of this sector where estimates range between $1.8 billion and $188 billion.
CPA Australia has weighed into the debate about the cost to oversee the industry, adding its voice to those who argue the fee structure favours the larger funds.
Equip cuts senior staff for passive in-house strategy
(pictured: Nick Vamvakas)
by Greg Bright
Equip is one of the oldest surviving super funds, dating back to the heyday of the Victorian coalfields in the 1930s. It has also been managing assets in-house for longer than almost every other fund – since the 1980s. Now, with a very modern assessment of risks, it has decided to vacate active management of its in-house assets.
Equip will first index its $683 million of in-house managed Australian equities as part of a restructure which was announced last week. Two investment professionals were retrenched the week before last – the chief investment officer, Michael Strachan, and the senior portfolio manager, Andrew McQueen. McQueen, a former director of Deutsche Bank in London, ran both internal and externally managed equities.
Rumours swirled around after Strachan’s departure was announced to do with the long-ago speculated merger with Queensland’s Energy Super and the possible outsourcing of all in-house assets.
Nick Vamvakas, the acting chief executive and executive officer overseeing risk, declined to comment on the merger speculation and denied that the fund would be outsourcing the $2.5 billion of in-house managed assets. Equip also manages some fixed interest, property and cash in-house.
Vamvakas said last week that the fund would continue to manage about one-third of its $7.5 billion in-house, but it would no longer be doing active stock selection. Its investment team would be focused on active asset allocation. “We don’t want to be picking stocks any more,” he said.
The Equip board is known to have been looking for merger partners for some time, believing that the extra scale would be of significant benefit. As was well publicised at the time, it had an ill-fated dalliance with Vision Super in 2012. The Australian Financial Review reported last week that talks had been held between Equip and Energy but insiders say, if a merger were to happen, it is at least a year or more down the track.
The two major problems with fund mergers are administration and governance. After investments, admin is the most crucial part of a fund’s operation. In this case, Equip is administered by Mercer and Energy is administered by IFAA, an independent Queensland-based firm. Both funds are advised for their investments by JANA. A merger would seem to make sense as it would create a more nationally oriented fund servicing the energy industries. Whether the two boards – the governance part – can get together on it remains to be seen.
Last week’s announced restructure at Equip is about the investments. Troy Reik, the head of liability management, has effectively taken over the investment team as executive officer of investment strategy. The team has been divided into three groups: defensive assets, growth assets and asset allocation. The team members retain cross-functional responsibilities.
Both in-house investments and oversight of external investment managers fall within the one group. Such a business strategy is the subject of debate among big super funds. Some, such as REST Super, separate the two from a governance perspective.
Vamvakas said Equip was strongly committed to evolving a liability-driven approach to investments, believing that it would enhance returns over the long term and help defined-benefit employers manager their investment risk, particularly in funds with aging demographics.
Equip has an ‘Extended Public Offer’ licence which allows it to service other defined benefit and accumulation funds through several MySuper licences.
