The $320 billion Australian Retirement Trust plans to double the headcount in its UK operation by the end of 2025 and add a similar number of new personnel in each of the next few years.
But ART general manager of mid risk assets and UK Michael Weaver says the fund’s UK operations will not rival the scale of its competitors’ any time soon and that there are currently just four staff located in London.
Weaver tells Investment Magazine that the fund will increase its presence as the value of its UK assets and investment partnerships grow and focus on developing its UK operation before turning its attention to other locations, including the US.
“We haven’t made a decision to open a New York office,” Weaver says.
“I suspect that we’ll probably make that decision over the next year or two. The intent at this point is to consolidate the London office and ensure we make the most of the presence that we have, and then we’ll look to the US after that.”
Weaver says hiring four people a year “is not many in terms of where some of the others are, but that’s what we are currently thinking”. The catalyst for setting up a London office in the first place was a decision to take management of an 11.2 per cent stake in Heathrow Airport in-house.
“There’s three people from my infrastructure team that moved over there just over a year ago,” Weaver says. Even though his title has changed recently to explicitly include responsibility for the UK, Weaver says he was “very involved the project…as the sponsor of the project setting it up and have been involved from day one”.
ART has infrastructure assets valued at about $4 billion in the UK, including its investment in Heathrow, and others spread across Europe, held both directly and through investment partners. ART’s commitment to the UK market has been characteristically considered and circumspect. It’s not competing head-on with asset owners and managers based in and around London for expensive local talent.
Weaver says hiring investment professionals in the UK market “would be much more challenging if we were looking to [invest] more direct and originate in those markets”.
“The reality is, anyone can invest internally,” he says. “Anyone can buy assets – just hire some people, and if they buy things, it’s internal. It doesn’t mean that they bought it well, that they’ll manage it well, or they’ll sell it well. Yes, you can save money on fees, but who are you going to be able to hire? Are you hiring the best people in that neighbourhood?”
Realistic about competing
Weaver says ART is realistic about how effectively it can compete against asset managers and funds that are much larger than it is and are able to pay more for the talent they recruit and want to retain.
“That’ll be something that we definitely have to confront,” he says.
“We will look to hire locals, but there’s a real question around what type of locals we’re trying to hire and what our strategy is there. As we continue to grow the team, we’re very happy to have people from Australia go over there, if it makes sense for them and for us.
“But as we look to hire talent, it will become more challenging. And I know that that’s an issue, not just for Australian funds, but for Canadian funds and others.
“They’re competitive markets, and they pay a lot better than the average Australian superannuation fund pays [and more] than many of the Australian fund managers pay. It’s just the nature of the biggest markets in the world and that’s what London and New York are.”
Weaver says some of the new hires in coming years may be drawn from the local market, but staff are more usually moved across from the Australian business.
“We generally look for people to be committed for three years, if not more,” Weaver says. “But there are exceptions, depending on the circumstances, and we’re obviously happy if people want to extend that, if it’s working out. We think the most important thing, though, is… the cultural fit, mixed with the talent that they have.”
Weaver notes that highly developed communications skills are also a key attribute for employees based a long way from head office.
“It is harder to be offshore,” he says. “You need to be a good communicator, because that’s what creates the culture.”
ART’s growth in offshore markets has necessarily been modest while management attention and resources have been focused on bedding down mergers, or “business beyond usual”, as Weaver puts it.
“Something like this is a little harder to do than if you didn’t have that merger lens going on,” he says. “We needed to make sure that we did it in a considered way.”
Managing relationships
The ART investment team totals around 140, which puts the size of UK operations in perspective. A significant proportion of its offshore assets are managed with investment partners , and a key part of the role of the UK team is to manage those relationships.
“When we think about where… we want to be over the next few years, it’s incremental growth locally, and it’s incremental growth in the London office as well,” Weaver says.
“Partly that’s informed by the fact that we’re not looking to internalise as much as some of our peers. Different strategies clearly have different approaches when it comes to the number of people that you need, and so we’re relatively relaxed in terms of making the most of the partnerships that we have. It’s [created] really good outcomes to members in the past, and we expect that to continue.”
Weaver says a benefit of having staff “transplanted” to the overseas office is that “they’re very in tune with how we work and the people making decisions”.
“They work generally a normal day, as do we; but like you would expect, there’s many times that we’re on a call in the evening or late at night or early in the morning, and the same for them,” Weaver says.
“It depends on sort of where daylight saving is for the year.
“The good thing is, particularly with the recording of many meetings, it’s a little easier for them to catch up on things so they don’t feel like they’re missing out on ‘normal’ comms and investment comms that have happened during normal business hours here.
“I obviously travel there and spend time in person, as do many of the senior team and other senior investment professionals and other people from the organisation as well.”
Weaver says having people on the ground close to the assets it’s invested in is a “nice to have” rather than being critical to how ART invests.
“It’s an enhancement, I would say, of the relationships you would have,” he says.
“Definitely when you’re underwriting a transaction, it is easier to be in the same time zone, there’s no doubt about that, because they move fast, large transactions, lots of diligence people on the phone. But instead of having people on phone calls till 11 o’clock, 12 o’clock at night from Australia, having people in the right time zone there is better, so it’s an enhancement to what we do.”
Weaver says it’s also beneficial having people on the ground close to the fund’s investment partners and “being able to develop those relationships over time”.
ART’s UK staff are also expected to scout potential new investment partnership opportunities.
While its partnerships to date have worked well, Weaver says “there’s no doubt that organisations change over time”.
“Whether it’s thinking about a replacement or a new addition to the portfolio, having people who can diligence that in the neighbourhood is definitely an enhancement to someone having to organise a specific trip to do that,” he says.
“We clearly still travel, me and other senior members of the team, travel overseas to do that,” he says. “But there is nothing like being a little closer to that.”
