One manager is enough. “If we’ve got an agent implementing this for us, we don’t need six of them,” Holzberger says. The fund sees more risk in it its exposure to market betas than reliance on one manager. “The manager is just part of the implementation.”

During the interview, Holzberger repeatedly refers to funds managers as agents. When asked why, he explains that his team attempts to make managers understand they are working for the fund. “Many times, investment managers present themselves as having a right to engage in risk-taking behaviour with our members’ money. They want open-ended, locked-in mandates where they are being paid extraordinary amounts of money for any outcome through highly profitable base fees. Or absolutely extraordinary amounts of money for a slightly better outcome they promised as being normal through performance fees earned by beating modest hurdles. And if they do better total fees are beyond belief.” It contracts funds managers in various arrangements: bespoke mandates, strategies developed for and seeded by QSuper, and those in which the fund has reserved complete capacity.

“Anybody that is working as an agent of QSuperis going to be a winner. We are a very committed, strategic fund. We don’t take these things lightly. So if you’re in, you’re in.”

QSuper uses fixed income to mitigate risk rather than seek returns. For the past year, it has held exposure to long-duration sovereign debt – in spite of the trend to buy short-duration debt to defend against inflation – because of the risks in equity markets. “We were under a lot of pressure earlier this year but it has been the right thing to do,” Holzberger says. “That exposure has paid off as a risk mitigator. If there was a major equity market collapse – and it has almost come to that – we would have done well.”

Its exposures to risk factors change as they become more or less attractive at different points in market cycles. “You need to manage your entry point to them,” Holzberger says. “That has to be dynamic.” And these exposures need to be updated as the fund grows.

This is an approach Holzberger and Lillicrap have brought from their time at QIC. It judges the way risk can impact different asset classes. The effect of inflation, for example, is not considered a risk for fixed-income investments alone. Changes in interest rates also impact equities and property as well as bonds. “When you manage risk at the highest level and inflation spikes rapidly, you [will] care more about your equity exposure than your bond exposure,” Holzberger says.

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