CEOs expectant of active relationships with fund managers

Superannuation funds are no longer expecting fund managers to “wave their magic wands” to generate returns and are seeking an active, two-way relationship going forward.

Speaking at the Citi Investment Conference in Sydney, Damian Graham, Aware Super CEO, and Sonya Sawtell-Rickson, CEO of HESTA, discussed the balance between in-house and external management.

Both agreed they expected to see a blend of both methods going forward.

Sawtell-Rickson said HESTA had mostly focused on using internal management for its domestic assets currently.

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“For us, it’s definitely going to be a hybrid model. Our view is we can deliver and attract talent to our business and deliver attractive net returns. But we are also going to be looking for complementary capabilities and insight and sharing of information.

“We’re no longer a passive client that just puts money in a fund and asks them to wave their magic wand. We are a much more active client. We prefer to have a concentrated partnership with managers who have a two-way information flow.”

Graham added that Aware Super already had 120 in-house managers but expected to use both methods for all types of assets.

“Most of our cash is managed internally but at the other end of the spectrum, private equity is managed externally. So we have a blend across all the asset classes.

“[External] managers have a fantastic part to play and we try to leverage as much value as possible from that.”

He said there were multiple facets contributing to whether an asset would be managed in-house or externally, not only fees.

“Fees are just one facet of it, information is another really important facet and so is controlling your portfolio. For example, retail property, that’s been under pressure and the ability to transact in your unlisted property portfolio is very low if you are doing it through funds. But if you own those assets directly, you have much more control.”