Fresh from a stint as head of asset management at China’s second largest insurance company, Ping An, the new chief investment officer of the $19 billion UniSuper, John Pearce, has some definitive views on how to position the fund for the future. He spoke to Aman da White about bringing some equities management inhouse, focussing on infrastructure in the developed world, and being more creative in setting its investment mandates.

It is a real changing of the guard at UniSuper, with a new chief executive and a new chief investment officer being appointed in the past year. John Pearce, the new CIO, has only been in the job for two months, but already he is engaging staff and the investment committee in challenging dialogues about how they conduct business. Managing equities in house is one of the options he would like to consider, and he is asking his team to engage in some collective thinking about the best way forward. The fund has 24 internal staff, spread across private and public markets, asset allocation, as well as fund rebalancing and performance reporting. “To date we haven’t managed any money inhouse but it is one of the things I’d like to look at for the future,” Pearce says.

“There is no reason why we can’t, with the level of skills we have in the organisation, particularly in the quant area.” The idea is to explore the possibility of model-based investing with the investment decisions made by UniSuper, and the administration and transactions performed by its custodian, National Custodian Services. With a lot of consultant studies now suggesting inhouse management is cheaper than external management, it is a persuasive argument, however it is not just cost savings per se that would drive the decision. “We have driven costs down pretty aggressively for our members, so I’d like us to have a better proposition than just costs. I would like us to demonstrate we can add value through returns, top line as much as the bottom line.”

Pearce’s predecessor as CIO, David St John, was famous for saying that for every $1 billion under management another internal investment person should be added, but Pearce doesn’t believe there is any magic number. “Asset management is a very scalable business in the public asset classes, I don’t think it takes any more resources to manage $1 billion or $5 billion of, say, fixed income. But when you get into private markets, it’s much more labour intensive. But if in 12 months time we haven’t increased our staff I’d be disappointed, I’m a growth guy. If we take on more internally, and we are going to be more committed to the private markets, that will come with staffing requirements,” he said. At the next investment committee meeting, Pearce said there would also be consideration of the fund’s international and Australian equities mix. UniSuper’s balanced fund still has a relatively high allocation to domestic equities at 27.5 per cent while the international equities allocation is 22.5 per cent, although it is quite innovative in its alternatives allocation.

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