The NSW Local Government Superannuation Scheme (LGSS) is surveying the asset consulting market as it prepares to move away from its current resourcing framework in search of a new model for investment research and decision making.
Craig Turnbull, chief investment officer of the $6.1 billion fund, said LGSS has spoken with consultants, including incumbents Intech, FuturePlus and Quentin Ayers, about the viability of employing them to cover specific areas, such as illiquid assets, rather than providing a comprehensive service. The fund was also determining which resourcing needs would best be developed internally. “We need to come to the best advisory model for the board – how many external resources, and how many internal resources, we should have,” Turnbull said. “Each fund has its own structure and preferences. It’s about what will be right for us. We need to work out where the gaps now lie.”
Turnbull said the discussions amounted to “preliminary information gathering” and did not herald an imminent review. However Peter Lambert, chief executive of LGSS, indicated that board approval of a new resourcing model would be followed by a formal review. “Once we decide on a structure we will need to go to tender,” he said. In its discussions with consultants, LGSS experienced some pushback from consultants on the subject of advising on specific areas of a fund’s portfolio. “Some asset consultants don’t want to play a limited role because they see that the ideas they put towards one part of the portfolio might create inconsistencies elsewhere,” Turnbull said.
“But with funds introducing their own chief investment officers and internal staff, they can play a greater role in watching over the portfolio.”
Lambert said the fund had the capacity to employ more internal staff reporting to Turnbull, but had not decided on what these roles would be. LGSS holds asset consulting contracts with Intech and FuturePlus, which it co-owns with the Energy Industries Superannuation Scheme.
Private equity and alternatives firm Quentin Ayers consults the fund on illiquid investments and manages some of its allocations in this area. The fund is also a shareholder in Regnan, a governance research and engagement firm, and employs it to assist in running an equity long/short sustainability overlay on its Australian equities holdings. It is also mulling whether to appoint an internal or external sustainability researcher to help meet its obligations as a signatory to the United Nations Principles of Responsible Investment (UN PRI), Turnbull said. “We’re considering [sustainability] research, but proxy-voting services are important as well.”
