VFMC plans to manage more funds internally in a bid to get total investment management, custody, administration and compliance costs down to a goal of 25 bps.
In a presentation to the Finance Industry Victoria Exchange, VFMC chief investment officer Leo de Bever, said 25 bps was the goal, even though it might take a few years to get there, and that would not be possible unless more funds were managed internally. “If you can attract and retain talent, the economics of internal management can be overwhelming. Ontario Teachers’ pays its staff what they can earn on the street, but they can manage over $100 billion for not much more than it costs me to manage $40 billion,” he said. VFMC has been hiring two professionals per week, he said. While the fund has clear aims to bring more investment management inhouse, he said there was still a lot of room to work with investment banks and asset managers, provided a review of what is right and wrong with traditional models is undertaken. “We will be brutally pragmatic in what we do ourselves and what we outsource,” he said. “Specialised mandates in efficient market niches will continue to be outsourced.” De Bever has an expectation VFMC would be able to reach the point where it can generate sustained value added over market benchmark within three years. He said the simple fact that most funds will not be able to get their total costs down to the 25 bps mark will drive consolidation in the industry from about 300 funds today to fewer than 100 in five or 10 years.
The $34 billion Brighter Super is set to shift around $10 billion of assets from passive to active management. Chief investment officer Mark Rider says the move is possible because of scale created by mergers, and the fund will be looking to its newly appointed active managers to generate performance through the cycle by taking idiosyncratic risks.
Darcy SongJanuary 21, 2025
