Although insourcing investment functions continues to gain popularity, Morningstar’s latest survey suggests that insourcing is “by no means the only way forward,” with funds still keeping the door open for managers and external asset consultants.
All funds regulated by the Australian Prudential Regulatory Authority (APRA) use external managers, the research house noted, and the overwhelming majority of funds benefit members – more than 90 percent, representing more than 1, $4 trillion in assets – continue to rely on external assets. consultants.
“In an industry that is moving inexorably towards fewer and larger super funds with increased outsourcing of investments, the reliance on external asset consultants can be expected to decline. So far, this trend has not materialized,” Morningstar said.
Regarding the use of external managers, Morningstar found that the most commonly used investment managers for Australian equities – for all funds above $20 billion in assets – are IFM Investors, Yarra Capital Management, Acadian Asset Management , Greencape Capital, State Street, Hyperion Asset Management. and Allan Gray.
Meanwhile, funds most often turn to global managers Baillie Gifford, State Street, Wellington Management, Macquarie Asset Management, BlackRock, Ninety One and T Rowe Price for their international equity mandates.
For fixed income exposure, the report identified giants like BlackRock, State Street, PIMCO and Janus Henderson, alongside Macquarie Asset Management, Wellington Management, TCW Group and Western Asset Management as the most commonly used.
Morningstar noted that many large funds with member benefits manage at least some of their investment functions in-house, noting that among large funds surveyed, the average team size has increased by about three-quarters over the five recent years.
According to the research firm, for large funds that have chosen to internalize, private assets have received particular attention, with the majority of the “big eight” having teams managing private equity , private debt, infrastructure and/or real estate.
Another emerging trend among higher member-benefit funds is the establishment of overseas offices, Morningstar said, adding that while four major funds – AustralianSuper, ART, Aware and Rest – have taken the plunge, only AustralianSuper has more than a handful. staff abroad.
When it comes to the consultants most typically hired by funds, the research firm said two firms — JANA and Frontier Advisors — are dominant, with about two-thirds of the 30 funds profiting from members who use the advice. into assets using one of the two. .
In advised funds, these companies cover more than 85 percent of the sector’s asset advisory market.
“The scope of a consultant’s involvement can vary; for smaller funds, this may essentially be a “full-service” outsourced investment team, while larger funds may hire them for certain stages of the process, such as capital market assumptions, selection of managers or as an external observer of their investment recommendations. » said Morningstar.
