'Fragmented' processes hurting super funds

Tim Stewart
— 1 minute read

The "clunky" internal processes of super funds are preventing trustees from optimising investment performance for their members, argues Simcorp.

Speaking to InvestorDaily, Simcorp managing director for the Asia Pacific, Nick Quin, said the super industry is "completely disintegrated" when it comes to the front office and back office.

Mr Quin spoke in the context of a white paper by Forward Look, which found improvements in operational efficiency can translate to anywhere between 51 and 242 basis points of retained alpha for institutional investors.


"This is 10 years' worth of research – we inherently believe it. By consolidating processes in the back end, you’re more efficient because you’re reducing the information latency," Mr Quin said.

The front office of a super fund needs to quickly receive accurate information from the fund's external investment managers in order to know how much cash the fund has and what its collateral exposures are, he said.

"At any one time, the chief investment officer of a super fund should be able [to go] to his computer and pull up an online view of where he’s sitting in the market," Mr Quin said.

Large pension funds in Europe and Canada currently use Simcorp's software to run their operations in an integrated way, he said.

"The [Australian] superannuation industry is often talking about technology in the context of member engagement, as well as platforms and distribution," Mr Quin said.

"Our view is that when you look at the essence of where the investment performance is coming from, there’s a whole lot of inefficiencies, and technology can help that. Therefore the performance of the actual fund is going to improve."

The notion of a fully integrated front and back office is known as an 'investment book of record' (IBOR), he added.

"For a super fund – anyone who is a manager of managers – an IBOR is very important because they can get all of their external managers to feed into it. Then they have a totally consolidated view," Mr Quin said.

An IBOR is not a data depository, he added; rather, it is a live database that can be used by chief investment officers to get an overall view of their fund.

"[Super funds] should be demanding they get this information from [asset managers] – and the technology’s available to do it," Mr Quin said.


'Fragmented' processes hurting super funds
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