Christian Super, a $1 billion fund, insourced its impact investing portfolio because despite searching for a fund manager they couldn’t find one to take what they felt was a compelling investment case.
Presenting at the Fiduciary Investors’ Symposium the fund shared its experience of moving insourcing, including cash and domestic fixed income, which were brought in-house because it gave the fund better risk management.
The in-house allocation of these portfolios has fluctuated over time depending on where the team has seen opportunities. The total allocation of all three portfolios is currently sitting around 12 – 13 per cent after coming down from a high of 16 – 17 per cent, mainly based on what was happening with the domestic fixed income portfolio, part of which has been managed externally. The impact investment portfolio has steadily been increasing.
Tim Macready, chief investment officer at Christian Super, was questioned on whether he might look to market the fund’s experience in impact investing externally.
He replied: “We are the ‘premier impact investors’ in Australia, but we didn’t start out to sell this to anyone else. We started this because we saw an investment case in our portfolio and we wanted to take advantage of that.”
He added that his team provided more reporting on a more frequent basis about internal portfolios to its investment committee than fund managers did about external portfolios, but the gap in governance was narrowing because of increasing expectations from investment committees on external managers and the oversight they provide about the portfolio risk, investments and operations.
Separate from Christian Super’s comments, the issue of information asymmetry was raised, where the manager knows more about the funds than the institutional investor. A particular issue was some managers treating these investors as a cheap source of capital for other parts of the business.
Specifically unit trusts were cited, which gave managers more control over what happens to the assets. Despite being able to sit on investment review committee when a transaction happened it was difficult for super funds to know what was going on.