He says the same process could  be used for KiwiSaver – the national  voluntary savings system in which funds  managers run individual accounts –  because it would increase transparency.  People could gauge the value of active  management and decide if it was worth  paying for.  “KiwiSaver is hard for an individual  because of the choices [available]. You  can choose between active and passive  [strategies] and it’s hard to know what  you are paying for.  “What would be more effective is to  have passive reference portfolios of, say,  balanced or growth, then an individual  could choose whether to pay for  something that is more active. It becomes  very clear what you are paying for and  that you receive what you pay for.”  Essentially, the link between cost  and value needs to be more obvious, Orr  says. This is currently complicated by  the abundance of service providers in the  investment industry  For most of his career Orr has  worked as an economist, including a  tenure at the Reserve Bank of New  Zealand as deputy governor and head of  financial stability. He says this industry  has “a wall of jargon around very basic  economic concepts”.  “The ability to charge fees from  asymmetric information is a driver. The  local mechanic is the same: there is an  advantage to be complex and charge for  that,” he says.  But allocating assets according to  their specific added value, compared with  what could be achieved from a low-cost  and simple alternative, adds irrefutable  transparency, he says.  At NZ Super, this method provides  a real measure of the investment team’s  success.

Trite and true  The fund’s vision is to have “a great  team building the best portfolio”, Orr  says. He concedes this is “trite like all  vision statements” but is nonetheless an  aspiration that guides the culture.  “A great team requires a lot of  effort but it is critical to define the  competencies we need to really work as  a team. It is all about caring about each  other’s advancement,” he says.  To this end, performance is assessed  by not only measuring achievements but  how they were made. Full 360-degree  reviews and other assessment methods  are used to do this.  “This is something we are getting  better at measuring. For example, an  individual won’t get a bonus if they  knocked the ball out of the park but  annoyed everyone along the way. The  same applies if you’re everyone’s friend  but have done nothing,” Orr says.  “No one individual knows all the  tools to get the investments done.”  Investment processes are initiated by  the asset allocation team, which is led by Neil Williams.

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