AustralianSuper is making good on its “mega-scale ambitions”, according to Morningstar’s latest review of the fund.
This, the research house said, is backed by proactive multi-year plans, laudable senior hires, and investment process uplifts.
“CIO Mark Delaney has been elemental to the internalisation of various capabilities and is well-supported by a skilled and experienced senior leadership team,” it said.
Morningstar also commended the quality of its recent external hires – citing Mark Hargraves’ appointment to head of equities and John Normand to asset allocation research – over the past year.
“That said, we note some of the challenges within the teams and capabilities.
“The speed of hiring may, however, have peaked, with the investment team now around 370-strong, up from 120 at the start of 2020. Turnover is a watchpoint, with some notable departures over the past two years, and time is required for the new additions to settle in and establish their contributions.”
The research house also raised concerns around the potential for bureaucracy but added that these are alleviated by the “autonomy afforded to the capabilities, and the depth of resourcing promotes room for further internalisation”.
“This increases the potential to capture the benefits of scale through cost efficiencies – particularly in esoteric assets.”
Turning to AustralianSuper’s investment capabilities, Morningstar praised the continued uplifts of the fund’s operating models, which better focus on aligning functions with specific portfolio outcomes.
These “sensible” structures, it underscored, seek to increase accountability within each team.
“The asset-allocation research has evolved to cover geopolitical and thematic implications more widely. Challenges are present though, with capacity constraints in Australian equities, an underperforming unlisted property book, and a large write-down in the internal private equity capability,” Morningstar said.
“While the offshore capabilities’ expansion continues, there are a few important milestones ahead before this is settled. These include increased robustness of the global equity and private
equity capabilities, considering the scalability requirements and expected asset growth, respectively.”
Regarding fixed income, Morningstar acknowledged AustralianSuper’s focus on improvements to its active duration calls, with senior resources hired to bolster this.
“Positively, mid-risk is operating more holistically, with the medium-term mix guiding portfolio positioning,” it said, adding that liquidity and valuation controls are sound.
“Overall, while there are watchpoints, we think that the fund has the right strategic recipe, credible leadership, and a solid track record at execution to continue delivering attractive risk-adjusted returns for its members.”
