As risk becomes more relevant to fund members as they enter retirement, new approaches to investment are being assessed. Broadly speaking, they fall into one of three categories: • Administration strategies • Derivative strategies • Insurance/outsourcing Administration strategies Administration strategies rely on dynamically altering the underlying investment mix to achieve a smoother return or risk-management outcome. Three approaches that appear to be growing in popularity are targetdate funds, target-volatility funds, and continuous portfolio protection insurance (CPPI). Target-date funds: This strategy rebalances investors’ assets between different mixes of conservative and growth assets based on an age-based “glide path,” traditionally focused on the investor’s planned retirement age. The principle behind target-date funds (also known as life-cycle funds, targetmaturity funds, and age-based retirement funds) is that investors need to adopt more conservative investment styles as they approach retirement. Target-date funds, however, have become the subject of much criticism.
Service providers battle for the boutique spend
Normal 0 false false false EN-AU X-NONE X-NONE MicrosoftInternetExplorer4
The stereotype is familiar: two gun portfolio managers leave an institution, ‘hang a shingle’ outside a small office, begin running money and living their entrepreneurial dream. But like all stereotypes, this is far too convenient and masks the complexity of some boutiques’ operations. There is no standard model for boutiques. “It could be as simple as a guy with a spreadsheet and a phone, trading Australian equities through IRESS,” says Bruce Russell, a former Morse consultant who now contracts for Victorian Funds Management Corporation. Sometimes the start-ups form when an entire product team at an institution walks – recall how the nine-person domestic equities team at Suncorp became Solaris Investment Management, almost overnight, in 2007. But as new business ventures, boutiques must come to terms with institutional demands for operational strength, and most have no choice but to outsource their back-office functions.
Super funds must lobby for preventive mental health
Group insurers are paying out up to $200 million a year for mental illness claims and much of this could be prevented through early intervention and treatment. Some experts estimate the on-costs and opportunity-costs reach $30 billion. This gathering of government, mental health experts, counselling services, super funds and group insurer CommInsure discusses funds’ successes and failures in early detection and prevention. Government participation is crucial, but it must be integrated, well-funded and aimed at prevention rather than high-cost emergency, hospital-based care Roundtable participants were:
Warts and worse show on super’s ‘agents’
At the latest workshop for the Paul Woolley Centre for Capital Market Dysfunctionality, held at UTS in April, Professor Ron Bird outlined upcoming research, including work of his own with Jack Gray, on the economic consequences of dysfunctional markets. Bird and Gray (who is a director of alternatives placement agent Brookvine and part-time academic) have looked at “the puzzle of active management” and “investors’ response to uncertainty”. They are planning research projects including “a new framework for the superannuation industry” and “how do fund managers treat institutional investors and why do the investors take it?” Bird and Gray’s work has led them to believe that an “uplift” – either increased returns or savings – of about 3 per cent a year is available to super funds.
Rocky Road – The Ups and Downs of MTAA Super
Walk outside MTAA House in Canberra, look to the left, and you are rewarded with a pretty good view of the flags flying on Capitol Hill. But it’s not just location that Australia’s Parliament House and 39 Brisbane Avenue, Barton, have in common. The most important man in both buildings seems to be a control freak. In Prime Minister Kevin Rudd’s case, the autocratic tendencies reveal themselves in a prodigious work ethic, which sees him micromanage the release of announcements at the same rate he burns out ministerial staff. Down the road, Michael Delaney is in the unique position of having created the two organsiations which take up all of level 3 at MTAA House – the Motor Trades Association of Australia (MTAA Ltd), and its associated industry superannuation fund, MTAA Super. At the time of writing, he remained the executive director of the former, and principal executive officer of the latter. According to those who’ve been on the boards of either or both over the years, there’s not much that goes on in this House which the boss doesn’t know about, either. Assets need careful, elegant allocation
People are doing a lot of things a bit differently these days. They’re spending a little more time with their kids, for instance. According to the trashy magazines, they are also being a little more patient/ understanding with their spouses. They’re also being a little more cautious with their spending. Blame it on the GFC. In the running of super funds, things have changed a little too. Risk controls, clearly, are being discussed with more passion at board and lower levels. And relationships with most service providers have been reassessed. For some, asset allocation processes may have altered, with consultants being given more, or less, power to make decisions. But has anything really changed that much? And will the little which has changed last that long? It’s the Cooper storm that’s killed super fund marketing
The era of advertising and sponsorships by superannuation funds is surely over. The exact date it ended will be recorded as April 23, 2010, when HOSTPLUS dramatically pulled its major sponsorship of National Rugby League team Melbourne Storm, after the jaw-dropping revelations of salary cap rorting. But I’d argue the show was over three days earlier, when Jeremy Cooper’s Super System Review delivered its preliminary report introducing ‘MySuper’, the quiet younger brother of the default option. Protecting retirement savings protects the economy
In particular there has been a suggestion that the tax treatment of interest on bank deposits be brought into line with the tax on returns to superannuation. Any change to the tax treatment of superannuation relative to other forms of savings puts at risk the retirement incomes of Australians, the pool of savings that sustained Australia through the global financial crisis and the Government’s five-point plan to reduce pressure on prices and interest rates. Earnings from superannuation funds are currently concessionally taxed at 15 per cent. There are dual policy reasons for superannuation to be concessionally taxed. Superannuation allows people to save towards becoming selffunded retirees which reduces the dependence on the age pension and ultimately reduces the burden on the Commonwealth Budget.
Online education switches on the viewers
AIST and FTV TalkingPoints TV have just launched Conferencein- a-Box to deliver online education for professional development points and super fund employees’ training. AIST is rolling it out to fund CEOs this week, said general manager Maryann Mannix White, and then to the wider industry. “This release of LearningOnLine is an opportunity for funds to share CMSF with colleagues who could not attend the event,” she said, “but want to take advantage of the content and want to accrue CPD points.” FTV TalkingPoints TV’s founder, Andrew Dawson, said Conference-in-a-Box (CIAB) is an online education and assessment tool based on existing conference content and includes: 1. conference sessions online 2.
Funds must face retirement challenges
Super funds must provide flexibility in their post-retirement product and service offerings as individual members’ needs dictate there is no one-size-fits-all, according to Wade Matterson, practice leader at Milliman speaking at the Investment Magazine Post Retirement Solutions for Super Funds conference. While these were the recommendations of Matterson, they were also supported throughout the day by all the speakers who presented research and opinion on the burgeoning sector. New research by Towers Watson, presented by Nick Callil and Duncan Rawlinson, demonstrated the appropriateness of blending different combinations of products, including annuities and the aged pension, depending on individual circumstances.
Mercer shows insight into the Cloud
Investment managers are the target of MercerInsight MPA, Mercer’s in-the-Cloud and latest version of its MPA performance analytics tool, with most of Australia’s managers already using the current version, according to Andrew Harrex, Mercer principal. MercerInsight MPA will “enable subscribers to slice-and-dice performance data” from more than 200 Mercer “universes” populated by 3,700 investment managers who manage more than 20,000 different strategies, Harrex says. The data in MercerInsight MPA is sourced almost entirely from Mercer’s Global Investment Manager Database (GIMD).
PineBridge heritage blends with new Asian ownership
With the change of ownership for what is now PineBridge Investments, investors can expect a greater focus after two years of turbulence for the US$88 billion manager. PineBridge, the former funds management arm of American International Group (AIG), was acquired by Hong Kong-based investment company Pacific Century Group (PCG) in March. Under the new ownership, PineBridge will gradually issue “a significant minority” of shares in the company to management, according to the long-standing chief executive, Win Neuger. Neuger, who started PineBridge after joining AIG about 15 years ago, said the major change for the firm was that it would be more entrepreneurial, with a focused group of about 900 staff as opposed to being part of a company with more than 115,000 as AIG was before it began to be split last year following its financial crisis in 2008.
