Mark O’Brien has been picked to head portfolio management for the amalgamated $60 billion New South Wales government funds.

O’Brien, who is currently general manager of investments at State Super, will be joined in the management team by Steve McKenna, current chief investment officer for Work Cover, who will look after client interaction and solutions.

Jonathan Green, current head of investments at TCorp, will be responsible for operational administration.

Each will be in charge of a separate division of the unified operation which will assume the name TCorp.

The appointments were revealed by Michael Cole, the former BT fund manager and chair of Platinum Asset Management, who heads the steering committee on the merger.

Cole’s original brief was to complete the management structure within six months, but as this had been achieved in three months, he was confident the merger was on track to complete before March 2015.

There are expected to be few or no job losses internally.

“If you put your hand up, I’m pretty sure you’ll get a gig. It’s not about cost efficiency it’s about optimising the investment process,” said Cole.

Optimising the investment approach will include reducing the 90 odd fund managers used by the three funds.

“Some mandates could even be the same between the organisations so there could be rationalisation out of that, but the process will be systematic approach. If you have two Aussie equity managers, do you need two? Maybe, maybe not.”

Also set to change is the number of custodians used across the merged organisations, with State Street, JP Morgan and BNP Paribas currently mandated.

“I suppose ultimately you’d think the best outcome is to have one, but it’s not something to deal with straight away,” said Cole.

Each organisation will retain its own asset consultant owing to differing investment aims.

T-Corp uses Jana, which has traditionally focussed on investment and Mercer for actuarial advice on assets and liability matching. State Super uses Frontier Advisors.

Cole said the biggest challenge was bringing together the administration of the separate fund operations and deriving cost savings from this.

He concluded: “These organisations aren’t broken they’ve got good investment performance. [But] if we can get 0.1 to 0.2 per cent better performance over sustained time, it will generate significant returns.”

The merger of NSW State Super (SAS Trustee Corporation or ‘STC’), NSW Treasury Corporation (TCorp), and what was formerly known as NSW Work Cover was announced in March.

At the time, it was stated that the amalgamated functions within the three entities would include the appointment of investment managers, due diligence, funds administration/ operations and reporting.

 

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