Even as Sunsuper added to its internal investment resources last month, chief investment officer David Hartley expressed reservations about extending his team’s direct investment responsibilities much further. The addition of an actuariallytrained risk and strategy analyst, Andrew Fisher from Milliman, has taken Hartley’s team to well over 20, if one counts personnel like a Brisbane-based investment lawyer. Industry funds of a similar size to Sunsuper, like UniSuper and AustralianSuper, have begun to ramp up internal management of some asset classes.

However the Queensland-based fund only runs a cash portfolio internally, as well as playing a hands-on role in a direct property portfolio which has a management mandate with AMP Capital Investors, and recently added the $100 million purchase of Sydney’s 35 Clarence Street to its holdings. Hartley said that direct internal management had to be implemented for the right reasons, and cost savings was probably not one of them. “If you’re going to employ people to run, in the first instance, a passive or enhanced passive equity or bond portfolio, and you’re doing it to get systems in place and establish broker contacts, then maybe that’s justified.

If you’re doing it to save money, you’d have to look at the pretty low institutional fees you can get out of an index manager, and question that reasoning,” Hartley said. Internal management also ran the risk of allowing valued staff to establish a track record in their own right, which then gave them the opportunity to set up on their own or be poached by another funds manager, Hartley added. “You’ve also got to consider the value of all the extra information you currently get from your external managers, and consider whether they would be so forthcoming if they considered you were in competition with them,” Hartley said. Meanwhile last month, Sunsuper made good on its preference for infrastructure debt over equity, awarding $100 million to Westbourne Capital, whose fourperson investment team (led by David Ridley) and chief operating officer are all former employees of Hastings Funds Management.

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