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.
TCorp gets a new real assets head (and prepares for black swans)
James Murray (photo at top) has been appointed head of real assets and private markets at TCorp. Murray has worked at TCorp since 2015, and was previously senior portfolio manager for diversified funds, defensive assets and credit. Prior to joining TCorp, Murray was head of fixed income and derivatives at State Super, senior portfolio manager for fixed interest at AMP Capital, and senior investment manager at ipac Securities/AXA Asia Pacific.
His new position was previously held by Diana Callebaut, who joined TCorp in February 2020 from Cbus and left in June of 2022 to take up the role of global head of investments at Pollination.
“James brings deep knowledge and operating experience of TCorp’s investment model, strong leadership capabilities and a fresh perspective to this critical role and team,” said TCorp CIO Stewart Brentnall, who has just returned from a week visiting with some of the Maple Eight Canadian pension funds. “I’m absolutely delighted to welcome him to the investment management leadership team.”
“The ideal person for this role is someone who understands asset management and at the same time has good experience in portfolio construction, so they will know the individual contributions that each of these assets and any future ones that we buy will make to our customer portfolios – rather than just being somebody who is an expert in real estate or infrastructure but knows less about the client mission and the skillset required consistently, through real time, to deliver the best possible portfolio that we can.”
Real assets and private markets account for around 20 per cent of the TCorp portfolio, including real estate, infrastructure, and private equity, which spans a couple of “opportunistic investments” including an investment of more than $1 billion in Resolution Life (TCorp doesn’t have a dedicated private equity capability, though it’s “under consideration”). Most of its investments have been “relatively core in nature”, with exposure to a lot of renewables and data centres, and a significant infrastructure concentration in aeronautics.
Brentnall said that further expansion of the real assets program will depend in part on the policy settings of the government – including whether the insurance pools it runs for iCare are encouraged or allowed to grow, and whether Treasury creates new special purpose funds or expands the existing ones – but not all of TCorp’s $20 billion allocation to private markets has been invested, and there’s “still some deployment of capital to be undertaken”.
“There’s been a significant increase (in real assets investing) over the last few years, and it’s a core part of portfolio diversification to ensure that we’ve got the right flavour of assets and the right balance between return generating opportunities and inflation protection and sustainability, which are three focal points of the real assets area for us,” Brentnall said.
Brentnall says that the investment environment “will be more challenging than it has been”, with interest rates and inflation both still rising and the plentiful liquidity of the last decade suddenly evaporating.
“We have to make our portfolios work harder to deliver the requisite returns that our clients need, and make sure that in an environment where we’re expecting greater volatility that we have more resilient portfolios that protect well against tail-risks and black swan events,” Brentnall said.
