A key architect of the compulsory retirement savings system lauds its many achievements, stretching from the national economy to the individual. Where it’s double faulting is in serving members – and it needs to be addressed promptly.
With performance and diversification driving demand, these funds are expected to experience four-fold global growth over the next decade to nearly $AU65 trillion.
Target-date technology for outcomes-oriented options
Target-date funds never really took off in Australia. However, the technology behind their delivery may well suit the new and clear trend to outcome-oriented investing. JP Morgan has built an open-architecture system based on its “cash allocation and rebalancing solution” (CARS).
While CARS is not available in Australia, the system should be of interest to funds which have introduced member-directed investment options or are considering doing so.
Basically, it’s an administration system which sits between the multifarious investments which can go to make up a targeted investment outcome – be it to deliver a certain dollar amount or to maximize returns at a certain date – and the custodian.
The problem for Australia is scale. In a case study produced for its global clients, JP Morgan says: “Offering a target-date fund requires coordination across a number of different parties, including investment managers, record keepers, glide path managers, and back office administration providers. An end-to-end, comprehensive solution at a reasonable price point was most desirable.”
AustralianSuper, a JP Morgan custody client, would be one of a handful of Australian funds which could justify the infrastructure build for such a solution. AustralianSuper’s member directed investment option uses FNZ technology coupled with UBS as broker.
