Super funds divided over internal management

Superannuation funds are divided on whether they will pursue internal management in the future with some saying it has brought down costs while others feel there is no need.

Last week, AustralianSuper chief investment officer, Mark Delaney, said it intended to increase its internal management to 75% as the fund approached $500 billion, up from 50% currently.

However, other super funds had mixed views on whether they would pursue this approach.

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UniSuper, which had $100 billion in assets under management (AUM), said 70% of its portfolio was already managed internally across Australian and international equities, property, cash and fixed interest but did not disclose if this would be increased.

“As one of the first funds to manage the majority of its funds under management internally UniSuper’s investments team now manages more than 70% of funds in-house, delivering significant cost and performance benefits for members,” it said.

At $135 billion AUM, an Aware Super spokesperson said: “Aware plans to increase the proportion of its internally managed assets across its portfolios from around 20% to 22% currently to around 40% over the next five years.”

It currently managed a portion of each of its Australian equities, international equities, cash and fixed income asset classes internally.

Meanwhile, at construction-focused super fund, Cbus, some 35% of its $65 million funds under management were already managed in-house as the fund said this had enabled it to reduce its investment fees and total costs. The fund was looking to increase this further in the future.

Cbus chief investment officer, Kristian Fok, said: “Cbus Super now manages over 35% of assets in-house.

“We have been able to achieve significant reductions in our total costs while continuing to deliver highly competitive returns. We have reduced investment fees by $400m since 2017.

“We are continuing to build our internal expertise and are working towards managing more assets internally.”

But industry super fund, Hostplus, which had $70.9 billion AUM, said it had “no intention” to bring its investment management in-house and highlighted the strong performance its funds already delivered.

“The fund presently has no intentions or plans to internalise asset management,” it said.

“The fund’s existing approach has delivered market-leading net benefit investment returns to its members that has seen its balanced option ranked one of the top three default options over rolling five, seven, 10, 15 and 20-year periods.” 

According to its latest investment manager allocations, the largest external manager for Hostplus was IFM Investors which held 22.7% of the fund’s total assets across a variety of asset classes including equities and infrastructure.

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