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.
Link buys Syncsoft to expand in government fund market
(Pictured: Rory Wainer)
In an intriguing deal, Link Group, the big private equity-controlled super fund administrator and share registry company, has bought Syncsoft, a well-regarded systems business which boasts some of Australia’s largest super funds as its clients. The deal is expected to be announced today (Monday).
Syncsoft’s 80-or-so staff have been told of the sale and, according to John McMurtrie, Link’s managing director, their response has been very positive. Link will leave them doing what they do in their own offices at Box Hill, near Melbourne, and the Syncsoft founders, Rory Wainer and Brett Christie, will continue with the business.
Syncsoft, started in 1990 as ‘Synchronised Software’, has been one of the most successful Australian financial administration software companies of several which have gone on to become international firms. Clients for its Capital administration system include: Westpac/BT/St George, GESB, UniSuper, Pillar, Super SA, ComSuper and AMP New Zealand.
McMurtrie said he had been talking with Wainer and Christie about the possibilities of a deal for about 18 months, given the changes within the superannuation industry with consolidation among big funds alongside disaggregation at the small end due to the growth in SMSFs.
“I’ve known them for about seven years, since I joined Link, and we get on well, I think. Anyone who can run a successful business for about 25 years I have to take my hat off to,” McMurtrie said.
Link’s admin company, AAS, would continue to use its AASPIRE system for funds, whose members total 4.5 million, while now being able to offer Capital to government and other defined benefit funds, he said.
“If those government or similar funds want to do it (administration) themselves, with outsourced software, we can now accommodate them. Syncsoft provides the system for almost all Pillar clients.” The biggest of these clients is the $51 billion First State Super of NSW.
Another, unspoken, possibility is for Link to buy Pillar if the NSW Government puts it on the market. The previous government actually did so in 2008 but withdrew from a sale due to political infighting over the simultaneously proposed privatization of NSW electricity. State government ownership of a super admin business appears to be an anachronism.
The other wild card for Link is the possibility of an IPO. The firm has been controlled by Pacific Equity Partners for the past eight years, which is towards the end of a private equity firm’s usual ownership strategy. Link has enjoyed considerable success in recent years, notwithstanding the global financial crisis, helped by systems issues at its main competitor, SuperPartners. As previously reported, SuperPartners has suffered massive cost overruns in its ongoing system makeover. Link has also recently entered the retail unit registry market, also helped by the exit from that segment by another competitor, Computershare. And in the past year it has started to offer a direct investment option, or new-style SMSF platform, to big super funds in conjunction with Macquarie Bank.
