Rest Super has marked a significant milestone in its internal investment strategy, with its in-house global equities team deploying its first capital on behalf of members.
The fund said on Wednesday it has commenced funding an initial $300 million mandate, with plans to progressively scale the allocation in the coming years.
The move is part of Rest’s broader efforts to enhance its internal investment capabilities, aiming to drive stronger long-term performance while reducing costs for its 2 million members.
Interim co-chief investment officer Kiran Singh described the development as the culmination of years of preparation, including extensive due diligence and team expansion.
“When we began to build this capability, we had a clear goal to deliver even more value to our 2 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.”
Rest appointed Richard (Rick) Mercado in November 2023 to lead its internal global equities function, assembling a team of five investment professionals with a collective 80 years of industry experience. The team has focused on refining its active stock-picking strategy, targeting high-quality global businesses.
Rest has gradually built its internal management expertise across multiple asset classes, including cash, debt, Australian equities, infrastructure and property. The fund believes bringing global equities management in-house will not only reduce fees but also provide deeper market insights, strengthening its overall investment approach.
The interim co-CIO highlighted on Wednesday 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.”
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, noted 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 emphasised 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.
