Asia’s top 2018 asset owners: Australia and China
AsianInvestor’s annual institutional excellence awards are designed to identify, recognise and celebrate the asset owners of the region that are either best-in-class in their institutional areas or geographies, or are fast strengthening their capabilities and worthy of notice.
Asset owners across the region are operating at an increasingly high standard in many areas of their operations. In addition, market conditions have been turbulent, making for tougher investing.
While that has made choosing the final winners more difficult, it is also pleasing to see a growing crop of impressive institutions across the region.
This year's winners by country and region were therefore particularly impressive. They combined continued improvements in their processes and internal resources with an astuteness to create increasingly complex investment portfolios amid tougher and less predictable markets.
AUSTRALIA/NEW ZEALAND
Sunsuper
Sunsuper continues to transform and innovate while also growing at a supercharged rate, adding A$12 billion ($8.77 billion) in assets in 12 months, an increase of 26%. Sunsuper now manages assets totalling A$58 billion and is closer to its target of becoming one of the big six players in Australia’s pensions market.
The increase in assets places Sunsuper in the upper echelons of the industry. It has a strong product range too. However, our judges were greatly impressed with the fund’s steadfast commitment to improving. It is raising its capabilities in investment innovation, member engagement, internal support processes and administrative efficiencies.
In March it was the first superannuation fund to sign up to a new voluntary code of practice for insurance products that is designed to enhance protections and increase member understanding of the insurance products attached to their super accounts.
2018 also brought a number of key changes to Sunsuper’s board as it moved away from a system of rotational terms for the role of chair to a best-person-for-the-job approach. In January 2018 outgoing chair Ben Swan was replaced by Andrew Fraser, the first independent director appointed to this role; and in August a fourth female director joined the board with the appointment of ex-NAB executive Georgina Williams.
Sunsuper is one of the only large funds heeding the Australian prudential regulator’s call to reduce fragmentation in the market by consolidating with smaller players. In July it signed a deal to merge with rural industry super fund AustSafe, adding 100,000 members and A$2.4 billion in funds under management.
The merger with AustSafe will be completed by March 2019 and brings to four the number of mergers that chief executive Scott Hartley has overseen in recent years.
Sunsuper’s balanced option returned 10.7% in the year to end June 2018, ranking it seventh in the industry, according to Rainmaker data. Five-year returns stand at 9.9% annually, placing it in the top-10 funds nationally.
CHINA
China Investment Corporation
China's institutional investors have endured a difficult 2018, caught between a plummeting local equity market, courtesy of softening economic growth and a growing trade war, and the Chinese government’s desire to limit offshore capital flows to protect the renminbi.
Despite these difficulties, China Investment Corporation (CIC) ensured that it made new strides to deliver returns over the long term. This has included taking more risky or illiquid assets. Over the six years to end-2017, it has raised its public equities exposure from 25% to 43.6% – over half of which is in US equities – while accumulating a 39.3% position in alternative assets from nothing at all.
It has continued along these lines recently too. An important step was its tie-up with US investment bank Goldman Sachs in November 2017 to form a $5 billion strategic relationship that invests into US manufacturing, industry, consumer and healthcare industries. While this is a relatively small investment for a fund worth $940 billion, it should also help CIC diversify into the property market of the world’s largest economy in the coming years.
Some observers claim the alliance was a desperate move to curry favour in Washington, given the growing US-China trade dispute. But if so it could yet prove prescient, allowing CIC to invest with a savvy partner and hopefully sidestep the mounting geopolitical tensions.
Other steps taken by CIC include rumours of a $1 billion tie-up with UK-headquartered and prominent Hong Kong lender HSBC, to invest into British companies with ties to China, as the impact of Brexit makes itself felt. If true, it would provide another example of the sovereign wealth fund seeking to use its longer-term investment horizons to profit from the turbulence affecting the world’s markets currently.
CIC continues to perform well for returns too. It reported a net annual return of 17.59% in 2017, meaning it has a cumulative annual return of 5.94% since its inception in 2007.