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.
WA’s $5.3b insurer reviews asset servicing
The Insurance Commission of Western Australia (ICWA) is undertaking a review of its asset servicing contract, currently with BNP Paribas Securities Services.
The review is being undertaken with advice from JANA Investment Advisers, overseen by senior consultant Jo Leaper, who heads up operational consulting. Julie O’Neill, ICWA’s CIO, is overseeing the process from the client’s perspective.
ICWA had $5.3 billion in two investment funds with slightly different horizons as at June 30 last year – the bulk of its $5.7 billion in assets. Their targets are very similar to those of big super funds: inflation plus 3 per cent.
Last financial year was difficult for the funds, as it was with most other big investors, with an overall loss of $2.9 million and a return of minus 2.6 per cent for the main fund due to the impact of COVID during the second half of the financial year. Nevertheless, the WA Government’s insurer still paid a dividend.
In his chairman’s letter, Frank Cooper said: “This year, we returned $254.1 million in dividends and capital returns (related to 2019 financial results) to the shareholder, the WA Government, in addition to paying $91.3 million in insurance duty, $65.1 million in tax and a $22.9 million interim dividend.
“We recognise the importance of these contributions to the Government as revenue source declines challenge the ability of Government to deliver important public services to Western Australians.”
