With its asset base still growing at a rate of tens of billions of dollars a year, Australian Retirement Trust (ART) is changing the way it thinks about investing and the liquidity demands that come with it, says Jody Fitzgerald, ART general manager for defensive liquid assets and portfolio intelligence.

“From an investment perspective, if you think about where we are today and where we expect to be in 2030 and beyond, we expect to be of much larger scale than we are today,” Fitzgerald tells Investment Magazine.

“So we’re thinking through how we deliver member outcomes as we start to grow and scale [more]; ensuring the investment teams are efficiently aligned to deliver that promise to members.”

To that end, ART is gradually moving towards what Fitzgerald calls “total portfolio management”.

“[Total portfolio management] means different things to different groups,” Fitzgerald says. “And a lot of the groups that are well known in this space operate in a different environment – they’re typically sovereign funds, and therefore have a different operating environment to what we do in superannuation. For us, the total portfolio approach is about having that joined-up thinking – hence that reorganisation.”

Part of ART’s move towards total portfolio management involved the reorganisation, in April, of the asset class teams to align them with how capital would be deployed across different risk buckets by the total portfolio management team. There’s growth assets, led by Liz Kumaru; mid-risk assets, led by Michael Weaver; sustainable investments and planning, headed by Nicole Bradford; and Fitzgerald’s defensive liquid assets and portfolio intelligence team.

Fitzgerald’s remit includes pure investment capability – assets across the cash and fixed income spectrum, including emerging market debt – but also has responsibility for an issue that super funds are spending more time and resources coming to grips with: liquidity.

“When you’re looking at an area like mine… there is this continuum of understanding the liquidity profile that you have in your fund, and some of your defensive assets will be your first port of call for when you those needs arise. Grouping those together can allow for that continuum of thinking within the one business unit.”

ART has always had a liquidity management function, but it’s become “more important” as the fund scales up and invests more offshore. It needs to keep track of everything from making member payments and switches to collateral obligations and currency exposures, as well as keeping one eye at all times on the potential for periods of market stress where liquidity is both vital and sparse.

ART’s exposure management team has three “strategic pillars”:  the balance sheet capability, which tries to “get the most out of” the fund’s liquidity and take advantage of return sources such as securities lending; the portfolio completion capability, where it considers whether to take some exposures physically or synthetically in order to free-up liquidity that can be pushed into other return-seeking sources across the fund; and the opportunistic team.

“We have access to a larger pool of capital that is long-term and stable, so can we take advantage of any supply and demand imbalances that exist in the marketplace?” Fitzgerald says. 

“A great example of that is opportunities like risk recycling, where we can take some exposure off groups like banks where they’re looking to move some of it off their balance sheet because it’s not capital efficient for them.”

Fitzgerald says that the reorganisation of the investment team hasn’t introduced more complexity into the fund, but that investors of all sizes need to be able to manage what is an increasingly murky and dislocated market environment.

“I don’t think you need to become more complex, but I think you need to understand that complexity and understand how to navigate that complexity. So with scale comes opportunity and complexity; the market itself has a level of complexity and analysis paralysis can be a real risk for any investor.”