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.
Rest’s combined mandate first for Eaton Vance
Calvert Research and Management and Parametric, two of Eaton Vance’s managers, have combined in Australia for the first time to manage the equities component of Rest Super’s new sustainable growth investment option.
Calvert is the US-based ESG specialist acquired by Eaton Vance in 2016. Parametric, an implementation specialist manager which is one of the global pioneers of tax-effective and other cost-efficient strategies, has been successfully marketed in Australia for a long time. Eaton Vance was acquired by Morgan Stanley last year to bolster its investment management arm globally.
The $60 billion retail industry fund’s new option consists of a diversified portfolio with enhanced ESG characteristics weighted towards growth assets.
It has an asset allocation across Australian and overseas shares, property, infrastructure, bonds and cash. Calvert will manage the equities portion of the option, making up about 72.5 per cent of the total portfolio, supported by Parametric.
Andrew Lill, Rest Super’s CIO, said in a statement last week (April 30): “The introduction of this option has allowed us to respond to the wants and needs of a number of our members, who have expressed that ethical investing is an important consideration for them when making decisions about how to best invest their super… The launch of our new sustainable growth option is a welcome expansion to the range of options that we offer to our members.”
Lill is Rest Super’s first CIO, appointed last year. He returned to Australia from the US, where he had been CIO at Morningstar, for the job. Prior to that Rest had had a general manager running the day-to-day investment operations. Earlier this month, Lill recruited Andrew Tomas from BlackRock as head of investment strategy and asset allocation, and promoted Sally Cobb, former investment consultant, to head of capital markets.
Chris Briant, who heads up Eaton Vance in Australia and New Zealand, said: “Calvert’s deep company-level ESG research and over 40 years of experience in areas such as active proxy voting, custom screening, and a focus on an improved ESG performance, as well as Parametric’s specialist implementation offering, provides the customised solution Rest was seeking.”
John Streur, the chief executive of Calvert, who had become well-known in Australia after his firm joined with Eaton Vance – prior to the impact of covid-19 – said super funds were focusing on responsible investing and had been active in the market for that reason.
“We were able to demonstrate the intellectual capital behind Calvert’s decades-long dedication to responsible investing,” he said in the statement.
