Industry Funds Management (IFM) will index half of AustralianSuper’s domestic equites portfolio – a $3 billion mandate – following the big fund’s rationalisation of its Australian share line-up, while the manager has hired Victorian Funds Management Corporation’s former head of quantitative investment.
“IFM will become the index manager – we are finalising the mandate with them,” confirmed Mark Delaney, chief investment officer of the $28 billion industry fund.
He said the individual mandate would account for “about half” of AustralianSuper’s domestic equities portfolio.
It is understood that Bernie Fraser, the former Reserve Bank governor and long-time trustee of the fund, was an influence behind the more passive strategy towards local shares.
Coinciding with this surge of new money, IFM has appointed Laurence Irlicht, the ousted director of quantitative investments at Victorian Funds Management Corporation (VFMC), to its Casselden Place office as investment director – listed equities last month.
Irlicht will concentrate on the part of the manager’s business that will soon receive the big allocation from the neighbouring AustralianSuper, whose office is four levels above IFM’s at the Casselden ‘ Tower of Power’, the home of other large industry funds Cbus and HESTA.
Delaney said the mandate to IFM would be invested in a traditional index fund and not an enhanced index product, which allows IFM to allocate slight overweights to favoured shares.
He said that at the end of April, after the number of active managers was cut, AustralianSuper held about $6 billion in its domestic equities portfolio, and that close to 50 per cent of this would be indexed with IFM. It is understood that UBS has been retained as transition manager for the big shift.
AustralianSuper has been an investor in IFM’s 100 Leaders Fund, an index product, for some time.
“We’ve been investing with them for about 10 years, and they’ve done a solid job over that time,” Delaney said.
Prior to committing the $3 billion to IFM, AustralianSuper had conducted a lot of due diligence on the manager and was confident that it could accommodate the surge of new money.
Aidan Puddy, executive director – listed equities at IFM and head of the indexing team, said its systems and staff could capably invest large amounts of capital.
“We have developed systems so that the business is fully scaleable,” Puddy said.
Clyde Haldane, fellow executive director – listed equities at IFM, added: “You don’t need a cast of thousands to do what we do”.