The $2 billion-plus Energy Industries Superannuation Scheme of NSW has shortlisted two international asset consultants as potential replacements for Russell, and has revealed the extent of the investment transformation overseen by FuturePlus CEO Richard Powis and general manager of investments, Michael Block, who arrived in January.
Whichever asset consultant prevails in the tender being overseen by Block, they will inherit an investment portfolio which has been significantly simplified in recent weeks.
In the domestic equities asset class, active mandates with AllianceBernstein, Orion and Barclays Global Investors (BGI) have been terminated, and replaced by a passive mandate with BGI (that acronym is set to become BlackRock Global Investors after Barclays PLC agreed to sell its funds management unit to Blackrock for US$13.5 billion last Thursday).
Roughly one half of the $350 million Australian equities portfolio will now be indexed through BGI, with the remaining domestic equity managers (MIR, Fortis, BTIM and Quest) expected to face a further round of rationalisation shortly.
On the international equities front, AllianceBernstein suffered another sacking, while EISS reduced an investment in State Street Global Advisors’ Global Index Trust. A second passive mandate with BGI has received the assets transferred from AllianceBernstein and SSgA, and will comprise roughly one-third of the $700 million international equities portfolio. That portfolio is now 50 per cent passively managed.
Investors have been deserting AllianceBernstein in droves, in a rebellion against bottom-of-the-survey performance and perceived drift between the value and growth components of the manager’s ‘Global Style Blend’ product. However in EISS’ case, Block said it was more that “the money we had earmarked for passive management had to come from somewhere, so we took it from the most expensive manager”.
Two Challenger-backed boutiques have benefited from changes to EISS’ defensive portfolios. Kumar Palghat’s Kapstream Capital has joined UBS Global Asset Management and Schroder Investment Management as new global fixed interest managers, replacing PIMCO, Loomis Sayles and Aberdeen Asset Management.
Block said the three new fixed interest managers would be restricted to government and semi-government securities.
“The previous managers were further up the credit curve but we’ve taken the view we want pretty plain vanilla management in our defensive portfolio. It’s got to be governed by interest rates, inflation, yield curves – otherwise it has too many similarities to equities.”
This argument also explains why Kapstream has become EISS’ cash manager, replacing a more ‘enhanced’ approach from QIC.