The bond portfolio and manager line of the newly merged $70 billion funds management operation of TCorp will place a greater reliance on in-house management.
The move will come as part of a general review to find the optimal mix of providers for State Super, TCorp and Safety, Return to Work and Support (SRWS) which includes a review to appoint a sole custodian.
Stephen Knight, chief executive of TCorp, said TCorp has already managed over $10 billion in cash and fixed income mandates internally since 1988.
“Given TCorp’s debt issuance and financial markets role we already have the ‘plumbing’ in place to do so (market access, IT systems, settlements, front/middle/back office segregation) so managing these asset classes internally is a logical fit,” he said.
Across its defined benefit and defined contribution plan State Super currently uses 66 fund managers. At $43 billion its assets make up the biggest part of the combined operation. TCorp uses 28 external managers and SRWS 26 managers.
Knight said there are no plans at this point to bring other asset classes in-house.
“The investment teams will evaluate the optimal mix of service providers for each part of the business, so there will be changes over time,” he said, adding that the key initial focus will be transitioning to a single custodian.
Currently, State Super uses JP Morgan as a custodian, TCorp uses BNP Paribas and SRWS has State Street.
The future of the investment consulting contracts for Frontier Advisors, Mercer and JANA, which work individually for the funds, would appear to be on a specialist basis for the merged entity.
“We have used external consultants to assist in different aspects of the amalgamation project, and will continue to engage specialist consultants and contractors as required,” said Knight.
After 12 months in planning, the recently combined investment operations of State Super, TCorp and the insurance funds SRWS were officially recognised yesterday by NSW Treasurer Gladys Berejiklian.
In an official announcement Berejiklian boasted that TCorp was now a “top 10 Australian investment manager”. As a distinct institutional fund entity, it will sit third in Australia behind the Future Fund and AustralianSuper in assets under management.
The merged team will have 45 staff across front and middle office functions based at its offices at Governor Philip Tower, Sydney (pictured).
Responsibility for the investment objectives, risk management and asset allocation of the funds controlled by SRWS, State Super and TCorp will remain with each of the separate entities and their respective boards.
Knight added that given the greater responsibility of TCorp to manage these assets, it would look to add further expertise to its board.