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Rest in-house global equities team takes first step with $300m mandate
The $93 billion fund’s internal global equities team has made its first move on behalf of members, with plans to expand its allocation and expertise over time.
Rest’s internally managed global equities team has officially invested its first dollars on behalf of members, it confirmed on Wednesday, having commenced funding of some $300 million into a mandate run by the team.
According to Rest, its in-house global equities team intends to progressively increase the allocation over the coming years.
First appointing Richard Mercado in late 2023 to lead the team, the $93 billion fund now boasts a five-strong global equities function, which includes portfolio managers Fredy Hoh and Anna Chen.
Commenting on the announcement, interim co-chief investment officer, Kiran Singh, said the milestone follows several years of extensive work to first “identify and validate” the opportunity and then build its team, which collectively has more than 80 years’ experience in financial markets and asset management.
“When we began to build this capability, we had a clear goal to deliver even more value to our two million members. By expanding our internal capabilities, we expect to continue delivering strong long-term performance at a lower cost,” Singh said.
“There has been considerable focus on developing the investment philosophy to underpin an active stock-picking strategy focused on high-quality overseas businesses.
“We have also undertaken further due diligence to confirm the mandate design is consistent with the opportunity initially identified at the whole-of-fund level and the team is operationally ready for live trading.”
Notably, the interim co-CIO said that the in-house global equities team complements the work that Rest does with its external managers.
“We believe that in-house management of global equities will not only deliver cost benefits for our members, but will also enhance the overall knowledge and expertise within our broader investments team,” he said.
“By continuing to expand our internal expertise, we bring additional specialist knowledge and perspectives in house. This can add value more broadly to the integration of responsible investing in our whole-of-fund approach.
“An enriched exchange of ideas within our in-house management teams is instrumental in identifying additional investment opportunities and managing our risks more effectively. This ultimately positions the fund for further growth.”
Rest already has a history of internal management, with capabilities across a range of asset classes, including cash, debt, Australian equities, infrastructure, and property.
Super funds have spent over a decade talking about and acting on internalisation, but external managers are still in the game, with most funds said to be favouring a hybrid approach, bringing some functions in-house while keeping experts on hand for other investments.
At a media briefing on Tuesday, Chant West’s senior investment research manager, Mano Mohankumar, said that full-scale internalisation remains rare. Only AustralianSuper and UniSuper manage more than 50 per cent of their assets in-house, while most funds that have taken the internal route manage between 12 and 35 per cent directly.
“This does mean that external fund managers play a critical role in super fund portfolios,” Mohankumar said. “While there is internalisation, it’s a hybrid model.”
For those looking to boost their internal capacities, like AustralianSuper, which is targeting 75 per cent of its assets to be managed in-house by 2030, he said that strong governance is crucial to internalisation, warning that it’s not just about onboarding but also about ongoing scrutiny.
“Have your committee challenge you, and your external consultants too,” he said, adding that, at most funds, CIOs can’t approve new investment mandates without investment committee sign-off.
AUTHOR
Jessica Penny
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