The Future Fund has begun a worldwide search for a new chief investment officer who can fit in with its ‘one team, one portfolio’ approach, after it was confirmed that David Neal would become the fund’s managing director.
Neal, who has served as CIO since July 2007, has confirmed he is likely to hold the investment role on an interim basis until a suitable replacement can be found, after he becomes managing director on August 4. From the announcement of the departure of former MD Mark Burgess in September 2013, it took 10 months to announce his replacement.
Some senior industry figures speculate the Future Fund board will favour an international candidate for the role, possibly an Australian national currently based abroad, as large investors increasingly seek to leverage relationships that can help them compete for scarce assets in a competitive global marketplace. While others have commented on the strength in depth in the Future Fund investment team and the risk of an outsider disrupting the process that has seen it acheive an average 7 per cent return since it was founded in 2006.
Neal is likely to continue to have a major influence on the investment strategy as late last year he likened his role as CIO to being the ‘chief culture officer’. This involves implementing a culture of debating all new investment ideas among the 40-strong investment team, regardless of asset type.
Moreover, much of the bonus payments are determined on the basis of the returns of the whole fund, regardless of whether an individual is responsible for an asset class that has done better or worse than the overall return.
Neal describes this as a “contest for capital between ideas and not between people” and one where team players are encouraged tell others where they have got things wrong. It is a culture, he admits that is not suitable for all investment professionals and as such the new chief investment officer is probably already working in such an environment.
Neal was appointed to lead the Future Fund after beating off overseas candidates, at least several of whom headed departments for large investment banks and fund managers in London. It is believed his good working relationship with Hon Peter Costello AC, chairman of the Future Fund Board of Guardians, was key in winning the role as well as his empathy to the public service nature of the fund.
In the prepared statement announcing the appointment, Costello described Neal as a “world class investor and leader”, adding: “The board is confident that he and his team will build on this and strengthen the fund’s reputation as a leading global investment institution.”