Pension Funds DIY: A Hands-on Future for Asset Owners was conducted by the Economist Intelligence Unit on behalf of State Street.
The report surveyed senior executives at 134 funds globally, including 26 large Australian superannuation funds.
Eighty-one per cent of the 134 global funds said they were looking to increase the amount of funds managed in-house by 2017.
For the 26 Australian super funds, the figure was 80 per cent.
The report noted that assets in the Australian super sector are forecast to reach as much as $5 trillion by 2025.
As a result, super funds will have the necessary “scale and sophistication” to take a more ‘do-it-yourself’ approach to investing, it said.
“Insourcing generates more administrative and management cost savings while giving [super funds] greater oversight of their portfolios,” the report said.
However, there are risks as well as opportunities, it noted.
“To succeed with insourced strategies, funds will need the advanced tools and capabilities required to manage the new investment mix,” said the report.
Specialist investment talent will also need to be hired and retained, it said.
“[Super funds are also] already better equipped than ever before to take on more risk with improvements in data mining and management and reporting,” said the report.
In line with the move towards more in-house funds management, Australian super funds are also becoming more sceptical about asset managers.
“More than three-fifths (62 per cent) of Australia-based respondents struggle to get a complete picture of risk-adjusted performance,” said the report.
“Fifty-eight per cent think their asset managers’ interests aren’t always aligned with their own,” it said.
UniSuper chief investment officer John Pearce, who was interviewed as part of the report, said his fund had a “strong conviction” that bringing funds in-house would improve its external management.
“We were always going to run a hybrid model, where by definition, a large percentage of our money is outsourced,” Mr Pearce said.
“[UniSuper’s] internal and multi-manager people are all sitting in the same team. This means the multi-manager people are sitting with the people that manage internal portfolios and they share some responsibilities in terms of sector and company analysis,” he said.
“As a result, the quality of questions we’re asking external providers has improved; it’s now a two-way conversation, not a one-way presentation,” Mr Pearce said.
