A confident public speaker and a voice on investment trends and macroeconomic conditions, Brian Parker joined Sunsuper in the newly created post of chief economist in June, after nearly 10 years at NAB Asset Management. He explains his new role to Investment Magazine.
Banks, large fund managers and governments employ chief economists, but until now it is not a common job title to see within a super fund. Arguably, there are many chief economists working with job titles that refer to strategy or asset allocation, but Sunsuper has stated the job clearly.
Then again, Brian Parker, the newly appointed chief economist for the $33 billion fund is not a typical economist. Parker’s role is to be an authoritative voice when strategic investment decisions are made and to be the fund’s spokesperson on its investments, but also to be involved in public debates of impact to all investors.
“As an industry I do not think anyone is going to get away with communicating less in the future given the size of the retirement pool in Australia,” he says. “We have an enormous responsibility to explain to members as clearly as possible what we are doing with their money.”
He adds that economists have an unfair reputation for living in ivory towers and not being good at communication. “I dispute that,” he says and describes himself as the chief translator for the investment team to its board, the media and to corporate clients.
As far as investment decisions go, however, it will be largely in the meeting rooms where Parker will have influence. The Sunsuper investment team already has its outgoing chief investment officer David Hartley and Corrin Collocott, manager investment strategies, looking at the big picture view. Parker describes his role as another resource and potentially the provider of nonconsensus views.
“I am a great believer that in any investment house, nobody has a monopoly on investment wisdom, everyone has something to contribute. In any forum we have people are happy to speak up and their views are taken on board.”
Parker is irritated by the popular notion of an economist’s role as forecasting stock market or currency valuations six months ahead.
“You can identify risks over time, but timing them is incredibly difficult,” he says giving the example of currency valuations, inflation and the overheating of investments in an investment boom.
“If you are in the forecasting business these are such uncertain times that you are on a hiding to nothing.”
He sees his greatest role as in identifying risks and opportunities. Examples of how he has done this successfully in his career include in 2001 when the Australian dollar fell to between 45-50 cents to the US dollar.
“People say now, that was a no brainer to have bought the Aussie dollar then, but it was easier said than done. I remember thumping the table and saying if you are ever going to hedge the currency this is a once in 10 year/20 year opportunity to make money.”
He also held firm over maintaining an exposure to risk assets during the Asian financial crisis 1997-98 when there was a view internationally that Australia was going to be decimated because of its economic ties to Asia.
“There was every expectation that we would do well, with the policy response and the currency falling,” he says.
While, he was right on both decisions, this was not proven instantly.
“If you want to be active with asset allocation you need to be patient, you need to understand from day one you are going to be early, you are going to take money off the table before markets start correcting,” he says.
This is especially true in today’s investment environment, which he describes as more challenging than at any time over the past 20 years.
“It is tougher to be in the investment business than any time I ever remember – even the safe havens look very dangerous”.
Prior to Sunsuper, Parker spent close to 10 years at NAB Asset Management, where he was head of the portfolio specialists group – so his prognosis on the outlook for banks as an investment should be noted.
Where some analysts believe an imminent rise in interest rates in the US, at least, will boost returns for banks and insurers, Parker is not so sure.
“From 1990s to the 2000s the banks delivered double digit earnings growth and a lot of investors had this view that this is what banks do,” he says. “But that was the best time to be in banking in the Western world, it may not be the next 20-30 years.”
He points out that not only is their continued regulatory pressure to hold more capital, but that with private sector debt levels still very elevated there is a limit to how much more debt that can be accumulated.
For him the only place with a decent return is in unlisted infrastructure, property and private equity.
The balancing act here is that funds have to be prepared to pay the higher fees and give up some liquidity for these more reliable returns.
At its last published accounts to the end of June 2014, Sunsuper’s balanced fund held overweight positions to these three asset classes at 24.3 per cent against a strategic allocation of 22 per cent.
There is also the not so small matter of overpaying for such assets.
“I worry about too many selfmanaged super fund sectors or other retail investors who have been prepared to chase property prices higher and by definition accept lower future returns,” he says. “I think that is a really dangerous situation.”
By contrast he cites Sunsuper as being very disciplined about what it pays for assets in the unlisted space.
“We are quite happy to invest in assets where we are getting a decent yield and to take money off the table when we are not,” he says.
As part of that strategy, he sees a greater need to invest offshore, in part due to the imbalance between the amount of funds available in Australia versus the opportunities.
The challenging investment environment means there is a larger role for funds to give a credible and persuasive story about their plans and their results, this is where Parker will play a role.