ART rejects trend for in-house management

Australian Retirement Trust has highlighted its focus on unlisted assets as well as indicating it will not be going down the path of internal management.

The fund, the newly-merged Sunsuper and QSuper, said it wasn’t looking to move to a high percentage of internally-managed assets. This was in contrast to funds such as AustralianSuper and UniSuper which were targeting 75%-80%.

Speaking at an adviser event, chief investment officer, Ian Patrick, said this was because it would be difficult for funds to consistently retain investment talent in-house.

He said: “We believe whichever investment model is pursued, we have to do it with the view of delivering returns to members on a sustainable basis. This means we would have to be able to keep the high quality investment talent inside the fund and continue to deliver those returns to members. That’s a very hard ask.

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“To source the best people in infrastructure, the best people in private debt and hold onto them is very tough and that’s the question you have to ask if you are going to pursue an internal model.”

He said the $230 billion ART preferred a model of hybrid where it sourced the best external talent and then did other “strategically important” tasks internally such as asset allocation and capital markets where it was helpful to be able to execute trades quickly.

He also said ART had a strong focus on unlisted assets such as property, infrastructure, private equity and alternatives. This was because they had less volatility, the fund could actively manage the assets and they allowed the fund to access difficult markets.

“Continued opportunities in unlisted assets are going to be a hallmark of our portfolios going forward,” Patrick said.

“Unlisted assets do exhibit some drawdown when markets are particularly weak but they tend to not be as deep and the recoveries follow in due course with the recovery in markets thereafter. They not only add that illiquidity premium we see in excess returns over listed markets, they have done so with lower levels of volatility.

“Another reason we feel unlisted assets deliver value is the opportunity to actively manage these assets. By holding a sizeable chunk, say 30%, you have the ability to insert directors onto the boards and exert greater control through business plans that typically tend to add value.

“You’re walking past a whole bunch of opportunities if you are not exposed to unlisted markets.”