Not-for-profit industry superannuation fund AustralianSuper will shift to a hybrid investment management model in order to deliver further cost reductions and increase net performance for its members.
“It’s an opportunity to reduce costs further and increase net benefits to members and there’s some pretty big numbers involved,” AustralianSuper head of equities Innes McKeand told InvestorDaily.
Australia’s biggest industry super fund currently uses a model under which more than 95 per cent of funds are externally managed, but it will move to a hybrid arrangement by shifting up to 30 per cent of its funds to be managed internally.
AustralianSuper had a target cost reduction at 10 basis points a year over five to seven years, with the savings from internal investment increasing as the super fund grew, McKeand said, adding that portfolio and global studies had shown internal investment management typically cost three times less than external management for a similar return outcome.
“Internal management will bring us closer to the market, give us greater control and increased capacity to access preferred asset classes,” he said.
“The plan is to build out from Australian equities into other asset classes over time and after five years we’ll see how we go, but there’s nothing in the plans to move to anything like 100 per cent [of internal investment management].”
He said the fund planned to commence trading on Australian equities by mid next year.
In addition, AustralianSuper will add up to 20 investment staff during 2012 and 2013.
The internal management team is aiming to recruit about 14 people into roles including direct stock selection and back-office positions in operations, financial and legal.
The appointments would be a mixture of predominantly external hires and several roles created for internal staff, McKeand said.
He will be responsible for the establishment and ongoing management of the internal Australian equities team.
AustralianSuper had $46 billion in funds under management as of 30 June 2012 and expects an increase to $100 billion by 2016 as a result of employer and member contributions, market returns and merger activity.
