BT Financial Group is changing its reputation as the provider of a retail fund that is overly fee-conscious and vanilla in asset allocation.

Under the direction of chief investment officer, Patrick Farrell, the group – which manages $27 billion of super and adviser-directed personal investments – has increased the size of its investment team to 31, recruited the head of asset allocation from one of the more adventurous industry funds and is generally taking a more bullish attitude to active management.

Farrell says: “We need to push the boundaries higher than the traditional ways we have run it in the past,” when speaking of BT’s MySuper product.

“Regulation plays a role in ensuring products and members have the best outcomes they can get for the fees they are being charged, but we do not think cheapest is best and we are a big believer in active management,” he adds.

An example of this change is the appointment of an international equity manager Lansdowne, which normally runs long-short hedge funds, to a long-only global equity strategy, which has achieved a 22 per cent return over benchmark in the last 12 months.

Farrell says this appointment is one of the best examples of how the strategy will evolve, with more idiosyncratic skill sets being added to the portfolio.

Purchasing alpha cheaply is also high on the research agenda for BT, with more smart-beta approaches being sought. “We need to focus on how smart beta expresses efficiently some of the views we have in the portfolio,” says Farrell.

In this capacity, BT have appointed another alternatives manager, Ramius, to run a smart-beta strategy for US mid to large caps, owing to analysis showing that the fund was overall underweight to US large cap.

This bolder approach has been endorsed by the BT Group. In October, when announcing the appointment of Corrin Collocott from Sunsuper as head of diversified portfolio management, it stated: “As the investment environment continues to undergo this period of uncertainty, BT is focused on building the best team of investment specialists that will allow us to seek every opportunity to boost returns, as well as the flexibility to adapt to the changing market conditions.”

Farrell says this has led to the go-ahead to add resources to the investment team. “We are putting in a lot of asset allocation expertise, because that is where the difference is going to be made ultimately,” he says. “Clients need a lot of portfolio construction capability, a lot of market research and strategy at this point too.” Collocott will have primary responsibility for implementing, managing and monitoring asset allocation decisions for the super funds and other diversified portfolios.

A third strand to Farrell’s upgrade to BT’s funds is to build strategic partnerships with the underlying fund managers to help achieve its goals and product sets. Negotiations are in progress for such partnerships, after conversations with several managers.

Farrell says, “That seems to be where a lot of our underlying fund managers are transitioning their business model to a degree; they want to have deeper relationships with a fewer number of managers.”


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