Tuesday February 09 , 2010
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Infrastructure: how super funds are changing the world

While the GFC has touched all aspects of funds management, there are some areas where its impact will have a more enduring effect on the way managers structure their investments. One of those areas is infrastructure. GREG BRIGHT spoke to the new team behind the old ANZ infrastructure business – now Infrastructure Capital Group – about the sector’s prospects.

For most super funds and other Australian institutional investors their experience with the ownership of infrastructure assets has, by and large, been a happy one. Not the same can be said for all such investors. Each of the eastern States has at least one disastrous toll road experience for investors and many retail investors in listed infrastructure funds were taught a painful lesson by the GFC.

According to Mike Fitzpatrick, a veteran of the asset class, much of the recent criticism of infrastructure – and certainly that part assigned to the investment banks which packaged and promoted many funds – is justifiable. He predicts that the days when investment banks fed transactions by outbidding each other to win tenders and then structuring the investments into funds, often with long-term management contracts in place, are hopefully over.

Choosing a transition manager...

in the one field that refuses to rationalise

Interest rates are not the only thing going up in Australia in defiance of the rest of the world. While the transition management marketplaces of London and New York have seen a number of investment banks exit, or at least ‘transition transition’ into their custody or asset management affiliates, in Australia the broker-dealers are standing strong, and in 2009 have even been joined by new competitors claiming ‘purer’ models.

Yet this abundance creates a problem for the chief investment officer wanting to move from Manager A to B. At least a dozen competitors are marketing seriously in Australia, and putting as many different spins on their service while doing so. These spins range from broker-dealer to pure agency multi-broker, asset manager, liquidity arranger, or project manager/consultant. So, a CIO could spend as long determining the right transition manager as they did deciding to transition in the first place.

MICHAEL BAILEY gets some guidance from consultants, and asks the transition managers (TMs) themselves, about how best to differentiate and negotiate in the transition management milieu.

Consultants' Revival

Dynamic asset allocation, enhanced asset allocation, strategic overlay, stractical investing: call it what you like, there’s a new kid on the block and it’s occupying the minds of super funds, asset consultants and funds managers alike. With super funds beginning to value downside protection more than incremental return, asset consultants and multi-managers have seized the opportunity by offering a service that moves away from “set-and-forget” strategic asset allocation (SAA) by taking intentional tilts over a medium term time horizon. KRISTEN PAECH reports on the investment phenomenon that has given consultants a new lease of life.

The great currency debate

Many super funds had to write out big cheques last year. They needed to cover their currency hedging positions over international assets as the Aussie dollar tumbled from near parity with the US to around 60c at its low point. As a result, and notwithstanding a subsequent recovery in the $A, future defensive strategies are being explored.

National Australia Bank recently held a one-day conference for super funds and managers to debate various aspects of the currency dilemma.

GREG BRIGHT reports.

 

FEAL turns 10

From CEO's Union to Industry Pillar

The role of what used to be known as the fund secretary has grown enormously in the past 10 years.

Helping that growth, through the professional development of the chief and other fund executives, has been the Fund Executives Association Ltd, which marks its 10th anniversary year this month with its annual national conference and members’ dinner in Melbourne.

GREG BRIGHT, a former FEAL interim board member prior to its formalisation in 1999, traces the association’s history and looks at its likely future.

Going Passive

Insto investors question active management

Never before, or at least never in living memory, have super funds faced such uncertainty as in the past 12 months. But with signs of recovery emerging for both markets and the global economy, trustee boards are feeling that it is safe to get back into the water. Most have been sitting on cashflow build-ups and have recovered a good part of their Aussie dollar hedging losses from last year.

The big question now is: what to invest in? If you believe in the recovery and mean reversion then this could be the best beta play of all time. On the other hand, active managers claim the markets represent a stockpicker’s paradise. The old active versus passive debate has returned with a vengeance. SIMON MUMME and GREG BRIGHT report.

I&T News

  1. Full-up at home, Paradice goes global
    With all its existing funds soft-closed, Paradice Investment Management has set up an office in Denver, Colorado staffed by three analysts formerly of Artisan Partners, to launch a global small-mid cap capability which has already found seeding of $200 million from an existing Australian client.    
    read more >>>

  2. Power play: Sunsuper shifts $1.3b from AMP Capital, backs itself
    Taking advantage of its increasing scale, Sunsuper has terminated a $1.3 billion international equities mandate with AMP Capital Investors, and split the redeemed money among five managers.
    read more >>>

  3. AMP still in sec lending limbo
    AMP Life, the parent of AMP’s superannuation business, has not resumed securities lending from AMP Financial Services' $66 billion asset pool after suspending the practice in the depths of the financial crisis.
    read more >>>

  4. Ex-UniSuper exec to chair investment committee
    A Melbourne-based industry fund has appointed Brett Lazarides, the former head of private equity and infrastructure for UniSuper, to become its first new investment committee chair in 30 years.
    read more >>>

  5. ING IM puts some volatility into the 'Mix
    Optimix, the multi-manager business of ING Investment Management, awarded $100 million to a volatility manager amid the recent changes to its international equities portfolio.
    read more >>>

  6. Credit Suisse funds reunited...sort of
    The Credit Suisse Investments Australia suite of 'alternative' managed funds will join their former 'traditional' counterparts, now owned by Aberdeen Asset Management, on RBC Dexia Investor Services' unit registry platform.
    read more >>>

  7. Look at market, not managers, when weighing active v passive
    The decision to invest actively or passively in a market must be based on the structure of that market and the indexes that represent it, not on the historical performance of active fund managers in that market, according to a new research paper from Russell Investments.
    read more >>>

Thriving in the New World Order

Thriving in the New World Order

The 13th Annual Investment Administration Conference

FEBRUARY 23, 2010

The region’s premier annual event for the investment administration and custody industry returns once again in February 2010. Sporting an optimistic, upbeat theme, the conference is shaping up to be the best yet and will discuss key industry trends and topical issues.

Free subscription...

..to Investment & Technology magazine for super fund trustees

If you are a trustee of a bona fide super fund, click here to register for your free subscription.

Things will probably be okay now … but maybe not

Greg Bright

If you thought the global financial crisis was over, don’t be too hasty. Scenario analysis by MLC Investment Management – placing probabilities against 40 different scenarios – puts the possibility of further massive falls in values for some asset classes a little too likely, or not unlikely enough, for comfort.

While not alarmist, with the most likely probability being continued recovery, the analysis illustrates the uncertainty embedded in asset values over the medium term, particularly for Australian and global equities and emerging markets. Susan Gosling, head of capital markets research for MLC, has produced a summary of the analysis to illustrate recent asset allocation adjustments to some MLC funds – the “horizon” series and long-term absolute returns fund.

Read more...

 

Universal picture: Back to the future with Cooper

Michael_Bailey

If Australia’s fund members are divided into four categories as Jeremy Cooper wants them to be, there’s a good chance that much of the colour and innovation we see today could be lost. To me the most startling recommendation was the one which, in my opinion, would see just about every Australian worker not already operating a self-managed fund placed instead into a “universal” category, under which they would be sent “back to the future”.

They’d be offered only one investment strategy (confusingly the report says this should include a target-date strategy), with vanilla insurance and minimal reporting. Isn’t this the kind of thing BT Investment Management came in and broke up during the 1980s? (Well, Ian Martin is on the Review panel.) I say “just about every Australian worker” will be deemed “universal” because under the Cooper recommendations, this is where they will end up if they do not make an express choice otherwise.

Read more...

   

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