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How are funds leveraging operational alpha?
While Australian super funds continue to generate impressive long-term returns, the volatility of those returns has put the spotlight on the impact of fees and costs, a new report has shown.
Ahead of the release of a new report on the future of super in Australia, JP Morgan has said that many funds have cut their fees in recent years owing to their growing size and scale.
However, this growth also introduces complexity, prompting a growing focus on what’s known as “operational alpha”.
Namely, operational alpha describes the way funds can overhaul common manual processes and procedures to improve their efficiency.
“This can flow into better member services, lower fees, or higher investment returns,” JP Morgan said.
In asking super funds for the areas they have been concentrating on in the last 12–24 months to achieve this, 80 per cent cited technology advancements as a primary area of focus.
Funds are also looking to enhance data quality and integration into operating models (66.7 per cent) and negotiate fund manager fees and relationships or insourcing funds management (53.3 per cent).
They also appear to be investing equal effort into transaction management, artificial intelligence, and Treasury management, with 26.67 per cent of funds flagging each of these as areas of focus.
As highlighted in the report, funds like UniSuper are embracing greater digitalisation to improve member interactions.
Siva Sivakumaran, chief of staff at UniSuper, said that the fund is looking to implement straight-through processing to resolve 80 per cent of member interactions immediately.
“This is a key component of our member servicing strategy,” Sivakumaran said.
Similarly, Mike Backeberg, AustralianSuper’s chief technology officer, emphasised the importance of seamless digital interactions.
“As an example, allowing members to authenticate seamlessly when engaging the contact centre makes this a superior service for members,” Backeberg said.
“This is aligned with how we want to provide members with guidance as they work towards and into retirement.”
While the majority of funds do continue to point to technology advancements as the key to unlocking greater operational alpha, JP Morgan said that it is not just technology that enables streamlining processes.
“Better data management, as well as enhancing data quality and integrating it into operating models, also play crucial roles,” the company said.
AUTHOR
Jessica Penny
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