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.
New bfinance recruit as workload increases
With an uptick in fund manager searches and increasing interest in its fee benchmarking service, bfinance has recruited a former fixed income manager, Daniele Goldberg, as a client consultant for its Sydney office.
She joins Frithjof van Zyp, senior director, and part-time consultant Gerard Parlevliet, covering Australia for manager search and implementation, performance monitoring, risk analysis and the new fee benchmarking offering which was introduced last year. Parlevliet is a former CIO of the Commonwealth Bank’s big staff fund and a current director of Prime Super and La Trobe Financial.
van Zyp said the firm had a number of important projects on the go, including three significant mandate searches and the ongoing development of fee benchmarking of manager strategies for super funds and other asset owners. The three mandates are:
- a global small-cap equities mandate
- a soon-to-be search, totalling about US$500 million, for Australian equities, US equities and European and UK equities, and
- A $200 million unlisted infrastructure search for a long-only manager to cover Europe with a focus on renewables.
He said that there had been an uptick in activity prior to the Federal Budget, which had thrown “another curve ball” at the industry, with people still wondering about its implications. There were also continued merger discussions and plans which took some time to work through.
The fee benchmarking service, available only to asset owners and as a standalone service, had been running for about a year. “It got legs after APRA introduced its ‘heatmap’ and the continuing focus on member outcomes,” he said. The heatmap, covering MySuper options, has been widely criticised for its potential to skew members towards low-fee, often index, strategies and question marks over the actual fees being paid by funds across their portfolios.
van Zyp said the bfinance benchmarking service was based on an historical analysis of actual fees paid my managers for specific mandates. “It’s based on live searches, not manager ‘rack rates’,” he said. “We then include a qualitative overlay for the assessment.” Manager names are anonymous. bfinance is remunerated through a calculation based on the fees saved by the fund in its first year.
Goldberg has worked primarily for Lloyds Bank in Sydney and London over the past 10 years, mainly in LDI (liability directed investments) and insurance sales, in London, most recently as associate director.
– G.B.
