David Bell (L) and Geoff Warren (R). Photo: Simon Hoyle

One could easily sit back and enjoy the crisp Blue Mountains weather, lovely catering, good conversations and insightful content at this edition of the Investment Magazine Fiduciary Investors Symposium (FIS). However, it is hard not to be drawn into the challenges presented by the thought-provoking presenters. Here we pen some of our reflections.

Challenged by hubris

The theme of hubris developed organically during the symposium. Joe Aston, the ex-AFR gossip columnist, raised hubris as one of the first indicators he looks to hone in on for the next big story. HMC Capital, Metlife Australia, Teachers Health and AIG Australia non-executive director Susan Roberts called out the privilege that exists in this industry and some of the consequences. Callidum Investment Research founder Rob Prugue detailed a scenario where hubris contributes to a systemic risk event for the super system.

Hubris can deflect people and their organisations from facing challenges. At its worst, it can foster poor decisions and unpreparedness for shocks and structural change.

Fortunately, we saw a good measure of self-awareness around an inability to know the future and the translation into how portfolios are managed. This was clearest in recognition of the value in diversifying exposures. Relatedly, Jack Purich of CPPIB noted that the deeper the performance attribution, the greater the likelihood of differentiating skill from luck and hence knowing where advantage exists and when to back judgment.

Risk matters, not just opportunity

This FIS was a good reminder that opportunity goes hand-in-hand with risk. Geopolitics and inflation seem to be front of mind for many. Maintaining sound liquidity management was also raised multiple times.

Inflation was highlighted as a risk with various drivers, notably including trade policy and government deficits. While concern over inflation has ebbed, it remains a factor.

Professor Stephen Kotkin presented a core scenario of a cold war rather than a hot war that involves a manageable concoction of competition between powers and proxy wars. His stance – which a participant described as “pragmatically optimistic” – intimated that geopolitics may not deserve the status of a major concern that PMs need to manage.


It was interesting that there were a few sub-themes rather than an overarching thematic.

While socially responsible investing and ESG remain ever present, the focus narrowed in on more specific challenges such as financing the energy transition, diversity and inclusion (DEI) and natural capital.

Many called out the energy transition as the capital-intensive issue of the time. Octopus Australia CEO Sam Reynolds set out the scale of transition capital required, while Impact Investing Australia chair Richard Brandweiner identified investing in energy transition as a giant opportunity for the super industry not to be ignored.

In terms of “hot” asset classes, private credit and, to a lesser extent, data centres received multiple mentions. The perception remains that the opportunity in private credit is solid (not a bubble – at least, not yet). Nevertheless, some disquiet was expressed over the magnitude of flows into the sector.

AI was also on the agenda, with Peter Williams from the Centre for the Edge providing guidance on the many different applications of generative AI. Perhaps the main takeaway was Peter’s surprise at how so few in the room were making use of AI (including us). We were impressed by the potential applications of generative AI to investment management. Internal champions and embedding within the workflow seem required to get things moving.

YFYS performance test is ever-present

Despite the brief from the FIS advisory board not to labour on the performance test, it was an ever-present issue raised by delegates. Most of the examples related to the challenges of maximising portfolio diversification and optimal implementation efficiency within asset class sectors: global fixed interest and emerging market equities were examples.

We presented an interactive session on performance test design, and the results were interesting. Most individuals personally chose to improve the test by introducing additional metrics, consistent with our submission to Treasury and that of session co-host and Chant West general manager Ian Fryer. This runs against the observation that many funds are advocating for little change, highlighting the tension between policy design and industry interest. Hopefully, Treasury can reach a good solution.

Evolving business models

The investment models at Australian super funds continue to evolve. Insignia chief investment officer Dan Farmer highlighted the increased use of derivatives to manage exposures. AustralianSuper global head of real assets Nik Kemp shared the strong deal access benefits already being experienced by their offshore private market teams. Aware Super chief investment officer Damian Graham touched on the fund’s efforts on internalisation and offshore expansion.

Some funds are working hard to create more flexibility and adaptability as their teams grow. Internalisation was largely discussed, as a mechanism to build operational leverage rather than a way to lower costs and fees, including by 1886 Consulting founder Doug Talbot.

We think the role of investments changes in the retirement phase, and sense that few funds have deeply focused on how to adjust their investment function. Our research paper (‘Investing for retirement’) outlines many activities we would like to see funds adopt.

Many of the changes taking place – notably fee pressure, internalisation, and developing capability in private assets – confront the traditional business model of fund managers based on active management of public assets. It will be fascinating to watch how this part of the ecosystem adapts.

David Bell is executive director and Geoff Warren is research fellow at The Conexus Institute, a not-for-profit think-tank philanthropically funded by Conexus Financial, the publisher of Investment Magazine.

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