Auscoal seeks absolute returns with CIO hire
The Australian superannuation fund serving the coal mining sector has hired ex-hedge fund manager David Bell to the newly created role of chief investment officer.
Bell is charged with managing the fund’s A$8 billion in retirement savings with a focus on seeking absolute returns.
Auscoal began the search for a CIO in August last year when the incumbent head of investments, Paul Coenraads, left the firm after a seven-year tenure. Broadstreet Global was appointed to conduct the initial search, but was not involved in the final appointment.
Bell was a known entity at Auscoal, having offered advice on post-retirement strategies in the past. He officially starts as CIO in July, and will spend the intervening period closing down his current advisory practice called St David’s Rd Advisory, which he established in 2009.
“He will ease into the role as a consultant first,” explains Auscoal Super CEO Bruce Watson. “He has been advising A$150 billion worth of finance and investments clients and needs time to wind things up.”
Prior to St David’s Rd, Bell spent 12 years at Colonial First State Global Asset Management, working mostly with its fund of hedge funds business. At its peak the business managed A$540 million and had nine investment staff across Sydney and London. Bell ran the division for the last six years and was involved in its ultimate closure.
Bell is currently completing a PhD and lectures a hedge fund module for the Masters of Applied Finance programme at Macquarie University.
Watson says Auscoal wants to draw on Bell’s absolute return experience. “The days of superannuation funds focusing purely on wealth creation are nearly over,” he says. “Our goal is to provide our members with a comfortable retirement, so we have to shift our thinking towards absolute returns.”
Watson says the superannuation industry has become too focused on monthly performance statistics which distract trustees from achieving their long-term objectives. “When your role is to assist people through their lifecycle, short-term benchmarking and monthly returns pail into insignificance.”
He says no decisions have been made on preferred asset classes or the right asset allocation mix. “The first thing David will do is review the existing portfolio and see if he wants to make any initial changes. We are giving him a clean sheet of paper to work with.”
Bell will be supported by a small investments team comprising of a portfolio manager, an analyst and an administration officer. Mercer is the fund’s current asset consultant.
The majority of Auscoal’s assets are run by external fund houses, although it manages its own direct property assets and half of its cash assets. It also handles its own administration and financial planning for members.
Asked whether the fund plans to manage more of its assets in-house, Watson says he is open to the idea, but is not entirely convinced of the benefits.
“There has been a push by some larger superannuation funds to hire their own internal teams, but I am yet to see the value in this strategy,” he says. “There are issues with getting the governance right, and the moral obligations you have to an internal staff member who might be underperforming. But I admit it is early days, and the benefits may start to surface as the practice evolves.”
Auscoal is weeks away from finalising a merger with Western Australia’s Coal Industry Superannuation Fund. The merger will add “a few hundred thousand dollars” to Auscoal’s coffers, says Watson.