POWERED BY MOMENTUM MEDIA
AustralianSuper has the ‘right strategic recipe’ to capture benefits of scale
In a new review of the country’s largest fund, a research house says it's well placed to deliver attractive returns despite challenges.
AustralianSuper is making good on its “mega-scale ambitions”, according to Morningstar's latest review of the fund.
This, the research house said, is backed by proactive multiyear plans, laudable senior hires, and investment process uplifts.
“CIO Mark Delaney has been elemental to the internalisation of various capabilities and is well-supported by a skilled and experienced senior leadership team,” it noted.
Morningstar also commended the quality of its recent external hires - citing Mark Hargreaves’ appointment to head of equities and John Normand to asset allocation research - over the past year.
“That said, we note some of the challenges within the teams and capabilities.”
“The speed of hiring may, however, have peaked, with the investment team now around 370-strong, up from 120 at the start of 2020. Turnover is a watchpoint, with some notable departures over the past two years, and time is required for the new additions to settle in and establish their contributions.”
The research house also raised concerns around the potential for bureaucracy, but added that these are alleviated by the “autonomy afforded to the capabilities, and the depth of resourcing promotes room for further internalisation”.
“This increases the potential to capture the benefits of scale through cost efficiencies - particularly in esoteric assets.”
Turning to AustralianSuper’s investment capabilities, Morningstar praised the continued uplifts of the fund’s operating models, which better focus on aligning functions with specific portfolio outcomes.
These “sensible” structures, it underscored, seek to increase accountability within each team.
“The asset-allocation research has evolved to cover geopolitical and thematic implications more widely. Challenges are present though, with capacity constraints in Australian equities, an underperforming unlisted property book, and a large write-down in the internal private equity capability,” Morningstar conceded.
“While the offshore capabilities' expansion continues, there are a few important milestones ahead before this is settled. These include increased robustness of the global equity and private
equity capabilities, considering the scalability requirements and expected asset growth, respectively.”
Regarding fixed income, Morningstar acknowledged AustralianSuper’s focus on improvements to its active duration calls, with senior resources hired to bolster this.
“Positively, mid-risk is operating more holistically, with the medium-term mix guiding portfolio positioning,” it continued, adding that liquidity and valuation controls are sound.
“Overall, while there are watchpoints, we think that the fund has the right strategic recipe, credible leadership, and a solid track record at execution to continue delivering attractive risk-adjusted returns for its members.”
AUTHOR
Jessica Penny
Recommended for you
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
Specific valuation decisions made by the $88 billion fund at the beginning of the pandemic were “not adequate for the deteriorating market conditions”, according to the prudential regulator.
The super fund, which formalised its merger with Spirit Super earlier this month, has announced it is exploring a “shared future” with a $1 billion industry fund.
Super funds are flocking to private markets for diversification, but their rapid growth and increasing complexity are raising significant concerns for regulators.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
