As super funds become more complex beasts, so must their trustee offices. They will need to at least consider the possibilities of cloud computing if they are to keep up, argues RAGAV JAGANNATHAN, general manager of Microsoft solutions at the IQ Business Group. If you have anything to do with the typical Australian superannuation fund’s trustee office, you have probably asked yourself a version of the following questions – • How can I improve collaboration within the trustee office team and find, use and share information promptly to improve responsiveness to member needs? • How could the office better manage, track and report on organisational initiatives and projects, including where third parties are involved? • How can trustee board and sub-committes secretarial processes be improved?
Funds managers report big increase in FIX usage
A survey of 20 major funds managers by consultant JOHN DIBIASE has revealed that FIX is close to becoming the dominant messaging standard for electronic trading, as dealers (or at least the order management systems they use) supplement or replace standards such as the long-dominant IRESS. The use of Financial Information Exchange (FIX) for electronic trading has been regarded as a necessary investment in most overseas markets but historically has had a low take-up by Australian investment managers. Shoreline’s 2010 survey has found electronic trading via FIX is well established and expanding compared to the 2008 survey: • Nine of the 20 participants use FIX for electronic trading – a significant increase from the three users in the 2008 survey • Asset classes traded electronically has expanded from equities only in 2008 to fixed interest, FX, and derivatives • Managers are taking advantage of higher value FIX functions such as allocations compared to simple order flow only usage in 2008 • Business drivers for FIX usage remain the same as 2008 – cost reduction and risk reduction
Fixing lost super without TFN? It’s Torture For Nothing, says industry
Easy, efficient use of the Tax File Number by super funds is a bit like motherhood: everyone wants it, but obstacles abound in its achievement and execution, while myriad parties have vastly different opinions on the optimum way to achieve the desired results. PHILIPPA YELLAND reports. It’s Miss Lonelyheart’s nightmare out there in Lost Superland: 4.8 million accounts totalling $13.6 billion; a reluctant and misunderstood matchmaker named Tax File Number; and a crowded ballroom full of interested, but frustrated, relatives lobbying Great-Uncle Jeremy to announce the new rules for easier courting, marriage, divorce and re-marriage. His recommendations for the new guidelines lobbed early last week under the title “SuperStream: a proposal to bring the back office of super into the 21st century”. Tucked away on page 19 is one of the most telling recommendations: that “Treasury be tasked with preparing a Privacy Impact Assessment to help identify and assess any privacy impacts of the ‘SuperStream’ proposals adopted by the Government”. And then on page 22 is another telling comment which rests on one word: “if ”.
Risk parity becomes bittersweet flavour of the month
A risk parity approach to asset allocation is flavour of the month, in spite, and because, of the leverage it requires, say Greg Allen, president and director of research at Callan Associates, and Steve Foresti, managing director at Wilshire Associates. The public castigation that the State of Wisconsin Investment Board [SWIB] received following its decision to use leverage in its new strategic investment direction, is testament to the philosophical leap required by pension boards in considering a risk-parity approach to asset allocation. On the surface, the theory makes sense: reduce the traditional allocation to equities so that diversification endures via a more equally-weighted allocation, and use leverage to increase the return.
How the search for yield hammered bond returns
When bond portfolios – the traditional defence for institutional investors – were smashed during the financial crisis, managers worldwide rushed to buy US government debt. This showed how far many had ventured beyond sovereign markets in their aim to outperform global aggregate fixed-income benchmarks – the catch-all indices for credit markets. Now, to better control the risks in their bond portfolios, some institutions are dictating which types of markets each of their bond managers can invest in, effectively disaggregating their credit exposures. SIMON MUMME reports.
Private equity is ‘slow-motion train wreck’: expert
The collapse of a private equity manager lacks the impact of a hedge fund failure: it’s like a “slow-motion train wreck,” says Chris Hunter, managing director of Cambridge Associates in London. Now that fundraising among private equity managers is down, leveraged finance scarce and the market for exits is weak, mega-buyout funds are busy keeping portfolio companies from grinding slowly to a halt. SIMON MUMME reports.
Softer face of China’s next great leap means different opportunities
Not much happens in the Chinese investment world without the central government’s say. Right now, Beijing is in the middle of an international row over the value of its currency, which dominates all other local financial discussions, at least in public. But there are more important things happening in China which institutional investors around the world need to watch. GREG BRIGHT* reports after a visit to Beijing for an investment conference. The Chinese funds management industry is just over 10 years old and already it’s starting to flex its muscles. To the frustration of the Government, the Chinese love to save and the locally grown funds managers, some of whom have foreign partners, have grown their combined businesses from zero to about US$ 370 billion since 1999. Destination Asia – Beyond the old ‘emerging market’ thinking
We hear all the time about how lucky we are, as Australians, to be ‘plugged into’ Asia. It’s the one part of the world where most things seem to be going right – banking systems already toughened by a previous crisis and standing strong, low levels of consumer and government debt, demographic outlook containing an increasing number of wage earners/ tax payers/conspicuous consumers. One might think that our institutional investors would be responding in kind, handing out ‘Asia’ specialist mandates like so many fortune cookies. But with a few exceptions – the Future Fund’s $1 billion allocation to Treasury Asia Asset Management springs to mind – they are sticking to the old global equities/emerging markets way of looking at the world.Diversity is power, says Bridgewater’s Zink
The global financial crisis has highlighted flaws in portfolio structuring with equities allocations far too dominant for a balanced portfolio that can endure in all economic conditions, according to Rob Zink, director of portfolio strategy at Bridgewater Associates. He says typically pension funds allocate about 65 per cent of their capital to equities, but what they ignore is this translates to about 86 per cent of the portfolio risk Instead the approach Bridgewater takes, and one they advocate philosophically – not just through their All-Weather product – is to build a portfolio that will be resilient in all economic conditions. “You can make tactical decisions based on your views of the world but this is a strategic asset allocation for the long-term which is independent of any specific view of the world,” he says.
Diversity is power, says Bridgewater's Zink
The global financial crisis has highlighted flaws in portfolio structuring with equities allocations far too dominant for a balanced portfolio that can endure in all economic conditions, according to Rob Zink, director of portfolio strategy at Bridgewater Associates. He says typically pension funds allocate about 65 per cent of their capital to equities, but what they ignore is this translates to about 86 per cent of the portfolio risk Instead the approach Bridgewater takes, and one they advocate philosophically – not just through their All-Weather product – is to build a portfolio that will be resilient in all economic conditions. “You can make tactical decisions based on your views of the world but this is a strategic asset allocation for the long-term which is independent of any specific view of the world,” he says.
Come hear the consultants…it could be your last chance
On our e-newsletter I&T News, it’s always stories about asset consultants that get the most clicks. So it was no surprise to find the ‘consultant plenary’ at last month’s Conference of Major Super Funds packed to the rafters, and one of the most talked-about sessions thereafter. The gatekeepers are still the go-to guys. The talent on the panel were refreshingly honest about where their businesses are today, and where they are heading. Is it any wonder that Frontier Investment Consulting wants managers to adopt a base flat fee? Its chief, Fiona Trafford-Walker, revealed to the audience that Frontier earned revenue of $10 million last year, on funds under advice of $100 billion. Neuberger back with a vengeance … and a big China capability
With strong Australian connections at the top of its Asia- Pacific arm, blueblood New Yorkbased manager Neuberger Berman is looking to re-establish itself in this market after a tumultuous few years. The firm regained its independence last year in an assisted management buyout, after five years of ownership by the now-defunct Lehman Brothers. Incredibly, more than 90 per cent of staff remained with the firm through the Lehman troubles and bankruptcy, and after the buyout was completed last May. In Asia-Pacific, which has been marked as a strong growth region, Tony Edwards was appointed chief executive last December and recruited Christopher Gunns as consultant relationships manager in January. 
