The fund has two pure alpha exposures gained through hedge fund managers, but will not pursue further investment ideas that are “artful and elegant” and don’t benefit the fund at its scale. The market’s counsel, however, says otherwise. “Everybody that we spoke to – including passive managers – argued that the fund should have lots of alpha.”

QSuper is playing a beta game. And fast. “We haven’t got time on our side,” Holzberger says. “We can’t muck about.” It aims to dynamically manage its beta exposures by accessing risk premiums – which are “easily identifiable and easily implementable” – in asset classes. “If we can’t identify them and implement them in a simple way, they’re not risk premiums. We’re kidding ourselves.”

This beta focus is tabled in the fund’s investment beliefs. The investment committee members, such as Michael Rice of Rice Warner Actuaries, Ian Macoun of boutique incubator Pinnacle Investment Management and, for a spell, Michael Drew, who now heads QIC’s lifecycle investment business, were “new in their chairs” when QSuper began debating how it should invest and why. The four-month process involved Graeme Miller, head of investment consulting for Towers Watson in Australia, who drew on the ideas advocated by the consultant’s UK-based global head of investment content, Roger Urwin. These principles are a work-in-progress and will be refined by the fund. “The next iteration will be very solid,” Holzberger says. But they underpin the strategy and governance structure used today.

The investment committee tackles major decisions. These are setting return objectives and the risk exposures needed to achieve them, and crucial changes in risk management. Holzberger and his team are empowered to implement dynamic asset allocation calls – which can be big enough to “move the needle” – and appoint funds managers. “So when we are dealing with our agents, we can be very clear with them about what is a deal-breaker and what is not. We are speaking as principal. We can say: ‘Decisions are going to be made today. These are our terms. Accept them or walk away’.”

The aggressive delegations, which give more rein to QSuper’s team compared to many other funds, were encouraged by its consultant. The fund’s growth makes them necessary, Holzberger says. “We didn’t want to grow out of our delegations.”

These liberties were not bestowed easily. The team had to prove it understood the fund’s origins and new investment principles. It had to earn the trust of the investment committee. “We had to win our spurs.”

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