Meanwhile, the four former Credit Suisse fixed interest portfolio managers who spun out before Aberdeen’s acquisition of their business – and have since formed a Challenger-backed boutique known as Ardea Investment Management – have been awarded an inflation-linked bonds mandate. Block said Ardea would take over an existing portfolio of ‘linkers’ which had been managed by an internal FuturePlus team that is now disbanded.
Meanwhile, the domestic listed property asset class has been abandoned by EISS, with Block saying it had become too disassociated from the fundamentals of property.
“It’s one-third Westfield and new developers. It doesn’t depend enough on rental income, and in any case our Australian equities managers are allowed exposure to LPTs.”
Consequently, a passive Australian LPT mandate with SSgA has been terminated.
Block said the big shift toward passive equities exposure could be unwound if active managers offered better “bang for the buck” in future.
Meanwhile, medium-term market timing will soon become a feature of EISS’ investment approach.
“This will reduce risk and better align returns with stakeholder expectations,” according to Block, who in his days running investments for WorkCover NSW utilised Mercer’s Dynamic Asset Allocation team under David Stuart.
In a further development, EISS will investigate separating the employer and employee contributions of the EISS’ defined benefit fund, to enable different investment management of the assets if appropriate. Block admitted this would be a complicated project, given the EISS ‘Trustee Selection’ default investment option blends DC and DB monies.
EISS CEO Richard Powis said the first stages of the investment transformation had produced encouraging results so far, with the fund returning to top quartile performance over the past three months. While this was encouraging, Powis said there was a “long way to go” to meet his and EISS stakeholders’ high expectations over a longer period.