Creating a more cohesive culture and encouraging sector specialists to think beyond their own portfolios is a major challenge the Future Fund is facing as it restructures to cope with its growing size, one of the fund’s deputy chief investment officers says.
Wendy Norris has been charged with handling the fund’s private market investments and will work alongside David George, who has the same rank of deputy chief investment officer but will be responsible for public market investments.
Both will speak about the restructure and how it will work at the Investment Magazine Fiduciary Investors Symposium, coming to Victoria in November.
The fund is still recruiting for a third role – a head of portfolio strategy. All three will report directly to CIO Raphael Arndt.
The restructure came about after the federal government last year extended the fund’s accumulation phase timeline, creating a need for a larger investment team.
The Future Fund grew 10.7 per cent to $148.8 billion for the the year to September, after it was established in 2006 with capital contributions of $60.5 billion.
Norris says the restructure was aimed at increasing the size of the fund as efficiently as possible, without doubling the number of staff. It was also designed to foster a more cohesive culture while keeping the philosophy of “one team, one portfolio”.
“We’ve always tried to have all of the sector experts involved in making the portfolio decisions,” Norris says. “As the team grows, we’ve found that we think we can drive richer conversations amongst investment team members by pushing some of that decision-making further down into the organisation, instead of having to have every decision go all the way up to the investment committee.
“We can create better, more nuanced conversations…by creating a more integrated private markets discussion forum, and a more integrated public markets forum, and allowing that collaboration to happen more organically, closer to the coalface.”
Norris, George and the yet-to-be-recruited third deputy CIO will ensure the right conversations are happening across their teams, then bring conversations that have undergone deeper, more robust debate to the investment committee, she says.
The longer-term goal is to build a team of better investors that can speak the different languages of different specialties and engage in informed discussions about the relative value between sectors, she explains.
“That’s actually quite a challenge in practice,” Norris says. “We’ve got great sector specialists who really love their sectors and know how to find really good value opportunities.
“You’re taking people who are specialists in their asset classes and trying to encourage them to hold their peers accountable for putting enough of that other sector’s asset class into the joint portfolio, rather than just prioritising their own investment ideas.”
As an example, she says exposure to listed infrastructure and listed property should be considered in the context of what the opportunity sets are in the direct-investing universe for both of those asset classes. Previously, the head of property was responsible for direct investment in property and real estate investment trusts, and there was a similar arrangement for another team responsible for listed and unlisted infrastructure. Now a new team is responsible for listed tangibles.
“We’re trying to create that richer conversation about the relative value, not just between property in its listed and unlisted forms, but between listed property and equities and also between listed property and listed infrastructure, as well as between listed infrastructure and unlisted infrastructure.”
Wendy Norris and David George will speak at the Fiduciary Investors Symposium in the Yarra Valley, from November 19-21.