Playfair AM: The new kid on the super block

Recognising the introduction of Your Future, Your Super (YFYS) legislation as a “game changer” for Australia’s $3.5 trillion superannuation industry, four industry stalwarts are bringing a new advisory and investment management model to the market to meet its unique demands. 

Entirely founder-funded and owned, Playfair Asset Management holds a central focus on supporting super funds and will offer custom-built strategies and portfolios for each fund’s individual needs.

Among its capabilities, the offering would include domestic and international portfolio management, asset allocation, sector research analysis, capital markets/block execution, and super fund corporate and stakeholder ESG engagement at the highest level with leading companies. 

“I think it’s still being underestimated how profound the impact [of YFYS legislation] will be, not so much by the super funds, but by the rest of the industry,” explained Simon Hudson, Playfair’s joint chief investment officer. 

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“A lot of the buy-side managers, certainly in the stockbroking world, are not on top of these changes and the challenges they bring.”

As UniSuper’s equities lead for over 12 years, where he was responsible for the fund’s domestic and international fundamental strategies, including both internally and externally managed portfolios totalling more than $60 billion of assets, Hudson saw firsthand how funds continue to grapple with issues around scale and the increased scrutiny that comes with it. 

He told Super Review: “Where Playfair is different to a lot of other managers is that we’ve worked on both sides of the fence in traditional buy side and for a very large superannuation fund. We recognised a window of opportunity and our relatively unique skills base.” 

He shares the title of Playfair CIO with Mark Himpoo, former senior manager at UniSuper, who had helped manage its $4 billion Australian equities portfolio. 

The rest of Playfair’s executive team is rounded up by former Jarden managing director and UBS co-head of capital markets, Dane FitzGibbon, as chief executive; and Playfair’s head of portfolio construction and risk, Stephen Ross, who was most recently head of asset allocation at Macquarie Wealth. 

Additionally, they confirmed they are in advanced talks with two senior portfolio managers, with the appointments to be announced in due course.

According to Playfair, as opposed to “external managers who come up with a product designed from a bottom-up perspective that they try and plug into a fund”, their offering aims to be more of a partnership to manage a fund’s capital depending on their needs, through a traditional external management model or even supporting a pathway towards internalisation.

Bucking the internalisation trend

Across the industry, there appears to be a growing trend towards boosting internal investment management capabilities, especially among the larger funds. 

UniSuper is one of the first super funds in Australia to build a dedicated in-house investment team, having over 70 per cent of its funds managed in-house. This has given Hudson and Himpoo a unique insight into internal management compared to other funds, where the focus is still on external management.

KPMG has also identified growing internalisation of investment functions among 10 key themes shaping super fund providers’ discussions and decisions in 2023.

However, Hudson argues internationalisation is actually “moving quite slowly” in the country. Other super funds such HESTA have small volumes in internal management in comparison to UniSuper and AustralianSuper, which is targeting 75 per cent internal.

“There’s nothing new about internalisation. There are only around seven super funds in Australia that’s doing it in any way, shape, or form,” he told Super Review.

“Internalisation depends entirely on the super fund board and their investment committee. They’ve got to factor in many aspects like membership and fund profile. The main issue is how super funds want to deal with scale, there’s where internalisation potentially comes in.”

On where Playfair will fit into this evolving super landscape, Hudson maintained it can be the “next best thing” for small- to medium-sized funds that don’t want to internalise and the hybrid model of super fund management that combines outsourced support and internal capabilities will still be prevalent in the country. 

Tackling scale issues

One of the biggest challenges Himpoo and Hudson observed during their time at UniSuper was around scale. This is especially true as funds reach the $30–$40 billion mark, when scale becomes a notable issue across multiple asset classes. 

On an episode of Relative Return, the new podcast by Super Review sister brand Money Management recently, Mayflower Consulting CEO, Sarah Penn, also flagged that Australia’s super funds, investment managers, and custodians are growing increasingly concerned about finding a home for $3.4 trillion of members’ money.

Himpoo agrees that, as a super-focused asset manager, issues around capacity are at the forefront of their thinking, however, he held a more positive outlook.

“Two of the biggest competitive advantages that super funds haven’t maybe exploited to date have been their scale and long-term investment time horizon. If you do set a portfolio for a long-term return, it is a low turnover product and that helps you take on much larger scale because you’re not trying to trade in the short term,” he said.

“Another thing with scale is, and we had a lot of experience with this at UniSuper, was using your scale to your advantage and that’s where strategic stakes come into play. For example, cornerstone large transactions, as a lot of investment banks are attracted to derisking these transactions by involving super funds early before they take deals to the market.

“On top of that, a lot of large positions in a single stock name can often turn the super funds into somewhat kingmakers, where anybody trying to make a corporate play on that particular stock needs to have the buy-in of the super fund. That is a different angle to look at this, rather than seeing their scale and inability to take in short-term trading as a disadvantage.”

Playfair CEO, FitzGibbon, who has more than 20 years of experience across finance and corporate roles, particularly in capital markets, also sees more opportunity than drawbacks in this proposition.

“There’s definitely a desire [among corporates] to partner with superannuation funds who they see as typically long-term investors with deep pockets that are only getting deeper. In some ways, I’m not sure the super funds really understand and recognise the opportunity in front of them to leverage that in the market,” FitzGibbon said.

“It plays out in capital market situations, in the ability to have an appropriate level of influence on ESG-type issues — there’s a number of ways you can use that market standing for the benefit of the fund and the underlying members.”

Setting their base

Deriving its name from Playfair Street in The Rocks, Sydney that played host to plenty of “great discussions” prior to establishing up the business as well a more literal translation that sets up the firm’s core values, Playfair has garnered a fair bit of interest and is in dialogue with a number of funds since it was launched two weeks ago. 

“But we haven’t signed any clients yet in terms of taking on an external mandate,” FitzGibbon said.

The asset managers are currently entirely independent and founder-funded, driven by the belief that skin in the game drives alignment with investors and thus outcomes.

“It’s fundamental to how we’ve built the business,” he added.

“We will stay open-minded to investment in the business from external groups going forward. It’s not necessarily time-critical as we’re up and running and engaging clients as we speak, but we’ll stay open-minded if it helps support the growth of the business and deliver a better client proposition over time.”