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.
Member admin shake-up as FNZ enters fray
After years of consolidation in the member administration space for big super funds, smaller and newer competitors appear to be gaining ground. FNZ and Grow have won their first clients.
GROW Inc (formerly Grow Super) was selected by Vanguard as the administrator for the manager’s proposed new superannuation business, against most industry predictions, and FNZ is understood to have been already approved by meat industry fund AMIST Super, winning the business away from Link Group subsidiary Australian Administration Services (AAS).
Link has been told of the change and a press release was awaiting approval from one of the parties involved last Friday (April 16).
Two other admin providers which have been recently recapitalised, Recreo and IFAA, are also in the hunt for bigger fund clients outside their usual patch.
The Vanguard deal, announced last week (April 12), followed a competitive tender where the two largest outsource admin companies, Link and Mercer, are thought to have made competitive bids. Link was favoured to win the contract.
Vanguard said in a prepared statement: “GROW’s flexible technology solutions and member focus will assist Vanguard in its plans to deliver a high-value, low-cost fund and continue to evolve our member offer over time.” GROW emphasises its distributed ledger technology in its promotional material, as well as its youthful tech-savvy staff (pictured above).
The manager announced its intentions to launch its own super fund last year and handed back index funds it had been managing for several big industry funds. The Vanguard fund is expected to be launched later this year.
New Zealand-headquartered FNZ was founded in 2004 by Adrian Durham, the CEO and largest shareholder, and has been established in Australia for more than10 years. Its largest revenue sources are in the UK, where Durham spends most of his time. The company has not, until now, attempted to crack the market for big super fund member admin.
It did, however, build up a portfolio of A-list industry fund clients in Australia in a partnership with UBS investment bank, starting with AustralianSuper in 2011, for new member-directed investment options.
These offered members advantages over the original investment choice options based on unit trust investments through greater flexibility and transparency. FNZ’s main competitor in this space was Macquarie Bank. That market for new business seemed to dry up after several hectic years.
AMIST Super had about 70,000 members and $2.3 billion in assets under management as at June 2020. Link also provides the AMIST members with a financial planning service through Link Advice. The fund is one of the rapidly declining group of small not-for-profit funds which is yet to merge with a larger fund.
Both AMIST and FNZ were contacted for comment but did not respond prior to this masthead’s deadline.
Recreo, which has spent the last few years as a subsidiary of Mine Super, has a proven system for member admin and the benefit of newer cloud technology to take to the broader market in its new ownership structure.
As reported in March, Mine Super is selling its majority holding in Recreo into a company currently controlled by Certane, which owns a trustee business and super business acquired from the failed Sargon and formerly listed Diversa, which will round out the Recreo offering.
Recreo started life as an SMSF administration business and, like GROW, uses the latest cloud-based technology. Mine Super initially took a 15 per cent stake in it but this grew as it funded continued development of the system over the past few years, which it successfully uses for its own fund.
Brisbane-based IFAA has a long history in administration for smaller industry funds and more recently a diversified and national client base. It is a wholly owned subsidiary of New Zealand-based MMC bought the outstanding 50 per cent of IFAA early last year, retaining the founder Neil Harvey and most of the senior staff.
IFAA already has a solid book of business in the space, having gone national in its distribution capabilities in 2019, when MMC bought its initial stake. As reported in March, it has won the NSW Fire Brigade’s fund for admin services.
