Following its acquisition of RiskMetrics, MSCI has begun expanding its sustainability research to emerging markets. But as it gains more experience in the sector, it has begun to look for more disclosure not only from companies but their institutional investors too. MSCI has begun extending its environmental, social and governance (ESG) research into emerging markets companies to enable investors benchmarked to global indexes – such as the MSCI All-Country World Index – to better incorporate ESG risks in their portfolios, said Remy Briand, global head of index and ESG research. But as the company focused on unearthing market-sensitive ESG information from companies, Briand urged asset owners who had committed to sustainable investing to dramatically improve their reporting on their ESG programs.
Think global for Aussie resources
Australian fiduciary investors are well-acquainted with the resources sector. They have to be. But Duncan Goodwin, a resources specialist based in Edinburgh, believes he can make it a bit more interesting for them. Goodwin is the director of global resources for Martin Currie Investment Management, which has managed a global resources long/short fund since 2003 and a long-only version since 2006. He is a strong believer in looking at the sector from a global rather than regional perspective. “We believe that margins play out globally,” he said. “We think it’s the right thing to be diversified through the various sub-sectors we look at.
Divide and conquer: ipac’s bond revolution
The $13 billion multi-manager ipac has divided its $2.8 billion fixed income portfolio into six sources of risk, in an attempt to assert more control over them, and has signed four new mandates in the process. In the restructure, ipac moved to disaggregate the various elements of credit risk – real rate, term, credit, inflation, currency and liquidity risks – and seek exposure to these factors discretely in attempts to meet the return objectives of its diversified portfolios. Jeff Rogers, CIO at ipac, said the overhaul should enable the multi-manager to “take more ownership of the strategic positioning” of the portfolio.
State Street tackles correlations of the unusual
State Street Global Markets has developed a series of “turbulence” indexes to measure volatility and the unusualness of returns. Will Kinlaw, managing director of portfolio and risk management group at State Street Global Markets in Cambridge, said the indexes were risk management tools that can be used by funds managers in all asset classes and by pension funds at the total portfolio level for stress testing. He said turbulence was a statistical measure of unusualness – the extreme relative to investors’ expectations – or the correlation of the unusual.
Workers transported to better fund
Managing growth while maintaining costs and value for money for super fund members has left fund executives feeling as though they are being pulled in several directions at once. The challenge for CEOs and boards was finding the balance between these competing objectives. Managing this balancing act and ensuring the fund had the right people in the right roles as well as being effective in their roles was key to a fund achieving its goals and successfully executing its strategy. This was the issue TWUSUPER sought to address when it asked Mercer to review the fund’s strategic plan, people strategy and organisation structure, as presented at a Fund Executives Association (FEAL) case study event last month in Sydney and Melbourne. TWUSUPER, the largest industry superannuation fund for the transport sector, has had consistent growth over the past 10 years.
Make money as the Fed prints it
The US Federal Reserve’s second round of quantitative easing (QE2) has created tactical buying opportunities, although equity managers are divided over whether the $650 billion injection into the global economy over the next six months will create a bubble in Asian and emerging markets. For Seres Asset Management, Australian Unity Investments’ Asian equities joint venture, the Fed is creating the “mother of all bubbles” on its turf, but that won’t stop senior portfolio manager Ken Hu from selective bullish buying. “You’re going to see a lot of money flow into Asian assets.
Big global firms benefit from staff ownership
Staff ownership of funds management firms was concentrated among boutiques, but not confined to them, said George Walker, the chief executive of US-based Neuberger Berman, talking about the differences for a large manager in being staff or institutionally owned. Australian super funds have had a love affair with boutique managers since the mid-1990s, after MLC, a bellwether multi-manager, backed the nascent Portfolio Partners spin-off from County Australia. Since then, boutiques have mushroomed, especially Aussie equities boutiques. Australia had been described, by former Russell Investments chief Alan Schoeinheimer, and others, as ‘the land of boutiques’. Russell, Mercer and Intech (now Ibbotson Associates) have published studies to show that boutiques, indeed, outperformed for various reasons and up to a point. Capacity was certainly a big limitation and early investors enjoyed more rewards than the later ones.
Where AMP and AXA reap inflows: themselves
If AMP succeeds in its takeover bid for AXA Asia-Pacific (AXA), it’s likely the merged entity would be heavily reliant on internal financial advice channels to continue reaping the vast majority of its retail investment flows and funds under management (FUM), according to research from Citi. AMP currently sources 90 per cent of its $36.3 billion in funds under management (FUM) from internal operations, such as its network of tied financial planners, according to Citi’s analysis of Plan for Life’s records of FUM and flows in the 2009-10 financial year. Importantly, the paper, Trends in Wealth Management Supplement, which followed an October paper Trends in Wealth Management: a growing role for intrafund advice, did not concern the wholesale funds managed by AMP in discrete mandates.
Mega super mergers move closer to reality
First State Super and Health Super have attempted to short-circuit the reason many proposed super fund mergers do not proceed, with the structure of the board of the successor fund already largely agreed. Meanwhile, the woman whom most expect to be CEO of the combined Equipsuper-Vision Super has revealed that one-third of the new scheme’s $8 billion will be managed internally. First State Super (FSS), the $20 billion NSW public sector scheme, and Health Super, the $8 billion Victoria-centric health industry fund, announced last month they were in due diligence to merge. FSS CEO Michael Dwyer made the initial approach earlier this year. The yet-to-be-named successor fund, slated to come into existence on July 1 next year, will be chaired by existing FSS independent chair Thomas Parry, while the other eight FSS positions – four nominated by Unions NSW, four by the NSW State Government – will be retained.
Fundamentals dominate long/short market
Fundamental equity long/short managers have attracted about $4 billion in funds under management to claim the lion’s share of the market as assets in quantitative strategies fell a long distance from a peak of $8 billion in 2007, according to Goldman Sachs. Melbourne boutique JCP, whose fundamental 150/50 strategy has neared capacity at $1 billion under management, is believed to be among the small group of managers that have come to dominate the equity long/short space. In an October research note, 130/30 Strategies: Relaxing Constraints To Target Higher Returns, Goldman Sachs stated the amount of capital in fundamental long/short strategies in 2007 was dwarfed by the $8 billion in quantitative counterparts, which is understood to have fallen to about $2 billion.
Major funds mull master custody's future
Three of Australia’s largest superannuation funds will discuss their evolving relationship with custodians at the 14th Annual Investment Administration Conference, coming up on February 15.
