AustralianSuper over-compensated for the risk of its in-house equities project management in 2013 to ensure success, according to its head of equities, Innes McKeand.
He told delegates at the Equities Summit that while this had created much work for himself and head of investment operations, Peter Curtis, it would have been preferable to a higher risk of failure.
The due diligence was also a trial run for the internal teams now created for domestic small caps and global equities.
The process involved a steering committee, the hiring of internal project managers and an external IT company to build technology platforms and servers. In addition there was work for the HR team in hiring the teams which now consist of seven for domestic equities and three for small caps.
“We spent more money than we needed to upfront, but it was money well spent,” said McKeand who added that there had been a “huge amount of challenges and we have not quite come up for air yet”.
The team’s first year of operation was a critical hurdle in winning support for the fund’s target of having 35-40 per cent of assets managed in-house by 2018.
“If we had lost 3 per cent against the benchmark in our first year we would have been really struggling, but we did really well, and now we are having to rein in expectations a little,” he said.
McKeand emphasised that returns on the project included a great deal of internal IP.
Much of this comes from a better dialogue with the companies the fund invests in through the internal Australian equities team. This aided the purchase of Queensland motorways in 2014, where the fund partnered with Transurban, by helping with fund raising and underwriting its rights issue connected to the purchase.
The deal saw AustralianSuper’s internal equities and direct infrastructure teams combining their knowledge to help win the bid.
The scale of all internally run assets at AustralianSuper was predicted by McKeand to rise from $24.1 billion in 2016 to $80 billion in 2022 as the fund grows from $92 billion in size to $200 billion.