Australia's Cbus takes portfolio construction inhouse
Superannuation fund Cbus has hired former asset consultant Brett Chatfield to join its expanding internal investments team.
Chatfield’s title is investment manager for public markets and he is responsible for overseeing the fund’s relationships with external managers in equities, fixed income, cash and currencies. He started in the new role last week.
Melbourne-based Cbus is the retirement fund for workers in the building and construction industry. It has more than 655,000 members and 75,000 employers on its register, and as at the end of January had A$21 billion ($21 billion) in AUM. This amount is expected to double within five-to-seven years.
Cbus conducted a wholesale review of its investment processes last year that led to the hiring of Kristian Fok as executive manager of investment strategy, and a decision to take an active approach to asset allocation.
The review was conducted in conjunction with local consulting firm Frontier Advisors and both Fok and Chatfield are ex-Frontier employees. Chatfield now reports to Fok at Cbus.
“As we grow, every decision we make regarding a change in allocation or the appointment of a new manager involves bigger sums of money,” says Fok in an interview with AsianInvestor. “The idea behind hiring people like [Chatfield] is to gain a deeper understanding of what our external managers are thinking and doing.
“We don’t necessarily want to manage assets inhouse, but we want to have better internal oversight of our portfolio.”
This will include “researching and making recommendations” on asset allocation and risk, identifying new investment ideas, and conducting more face-to-face meetings with managers.
“I came from an asset consulting background and I know consultants prioritise research towards ideas that can be applied across multiple clients,” adds Fok. “We want to be prioritising our research around investment opportunities that best help us, rather than ideas that appeal to all superannuation fund investors.”
Cbus is already looking at equity mandates that incorporate the use of warrants and options; is considering allocating more money to co-investments in infrastructure; and is exploring how best to tap into opportunities presented by China’s growing middle class.
“We will still maintain a relationship with our consultants as they will challenge our ideas to ensure they are robust, but we expect that their role will change over time,” says Fok.
The new-look investment philosophy has also impacted the way the fund uses benchmarks and views competitors. “In the past we have been too preoccupied with what our peers are doing, when really we should be focused on mitigating risks and managing the biases in our portfolio to ensure we’re getting the best outcome for our members,” says Fok.
“We have abandoned an explicit objective of ranking our performance against peers and instead have elevated the inflation-plus targets with appropriate risk measures.”
On the equities side, Cbus has reduced the emphasis on tracking error as a main measure of risk, and is focused more on finding managers that can perform consistently, particularly in bad markets, notes Fok.