Insourcing of Investment Management. Peter Curtis Head of Investment Operations

Transcription

1 Insourcing of Peter Curtis Head of Operations April 2013

2 Foundation for Success of Internal Sourced from Global Projects Centre Clarke & Monk

3 Networks Sourcing deal flow Pro-active announcements regarding strategy Development of relationships with key managers Exploiting size and brand Development of relationships with intermediaries 3

4 Communication The case for change Challenges Goals Growth Capacity Costs ~$100bn funds under management by 2016 ~$500m fees paid to external managers by 2016 Capacity constraints exist with external managers New managers will drag fund performance Analysis indicates it is not possible to reduce external management costs to a level that will deliver the outcomes needed by AustralianSuper AustralianSuper is seeking top decile performance measured over a 10 year timeframe Achieving the primary performance goal necessitates a higher level of outperformance than has been achieved since the merge While the current outperformance from asset allocation and sector tilt remains scalable and will contribute to the 2016 performance targets the remaining targeted increase to performance returns must come from improved external manager selection or internal management 4

5 Delegations and segregation Review and revise delegation framework Governance Compliance with prudential requirements and best practice Clearly defined roles that ensure appropriately skilled & trained staff can operate within documented policies & procedures Decision Making Transparent processes separating recommendations and approvals of decisions outside of delegated authorities All decisions will be evidenced by a clear audit trail Implementation The implementation of decisions will be undertaken with appropriate segregation of duties evidenced by a clear audit trail All securities will be held by the approved Master Custodian Monitoring & Appropriate monitoring mechanisms will be in place to assess the effectiveness of the decision making process Independent reporting of performance, risk and compliance activities 5

6 Mandates Clearly articulate the objective of the internal team Internal teams treated same as external managers Capital allocated to internal team follows same process as external managers Formal mandate documented including return expectations, constraints and guidelines Performance will be monitored in same way as external managers Under performance will be managed as with an external manager Formal approval required to move outside of mandate Critical to capture the insights from the internal team to deliver benefits of one portfolio 6

7 Asset selection Principles for selecting where to start Capacity constraints Cost pressure Long term investing / alignment Control / Influence / ESG Insight Ease of Implementation 7

8 Risk Taking Culture Identify the culture that will align the investment team Performance focussed and constructive Member first One organisation focussed on one portfolio Clearly articulated investment philosophy Constructive challenge Encourage new ideas and provide a safety net Experience is the sum of our mistakes 8

9 Risk Improved operational risk management processes First Line of Defence Second Line of Defence Third Line of Defence Trustee Board Trustee Board Trustee Board Committee ACRMC or Risk Committee Committee ACRMC or Risk Committee Committee ACRMC or Risk Committee Head of Infrastructure Head of Equities Chief Internal Officer Committee Asset Allocation Operational Group Risk Group Head Macro & Chief Operating Head of Fixed Head of Property Portfolio Officer Interest Construction s Risk Operational Risk Chief Risk Officer Legal & Compliance Finance & Risk Head of Infrastructure Head of Equities Chief Internal Officer Committee Asset Allocation Operational Group Risk Group Head Macro & Chief Operating Head of Fixed Head of Property Portfolio Officer Interest Construction s Risk Operational Risk Chief Risk Officer Legal & Compliance Finance & Risk Head of Infrastructure Chief Internal Officer Committee Asset Allocation Operational Group Risk Group Head Macro & Chief Operating Head of Fixed Head of Equities Head of Property Portfolio Officer Interest Construction s Risk Operational Risk Chief Risk Officer Legal & Compliance Finance & Risk First Line of Defence Risk and OperaEons Risk capability will be embedded within the Department. Second Line of Defence Risk oversight and support by the Chief Risk Officer Third Line of Defence Independent assurance of the Risk Controls / ReporEng will be performed by 9

10 Organisational Capabilities Target Operating Model AustralianSuper Department 1.1 Governance Structure 1.0 Governance 1.2 Governance Committee Board Internal Committee Audit Risk & Compliance Policy Strategy Option Asset Class Allocation Agreement Monitoring and 7.0 Planning & Operational Portfolio Construction 2.0 Front Office 2.1 Macro & Portfolio Construction 2.2 Option Options Trading & Execution Trade Order Initiation Trade Research Execution & Selection (Tilts) & Instructions Allocation (Asset Class) Fulfilment Counterparty Relationships Cash Flow Allocation Portfolio / Review & Monitor Portfolio / Oversight Position Performance vs. Benchmark 6.0 Corporate 6.1 Finance 7.1 Internal Fund Risk Officer Research Australian Equities Portfolio Portfolio Selection Analysis Construction (Stocks) 2.3 Internal 2.4 External Managers Unlisted External Manager Selection & Trading & Execution Portfolio Execution (Acquisitions / Divestures) Direct Detailed Manager Trade & Fulfilment Portfolio Portfolio Manager Due Diligence Valuation Analysis & Analysis Allocation Execution Construction Research Construction Research Platform Approval Approval Financial (Cost Allocation) Fees & invoicing Statutory Accounting Order Initiation Broker Relationships Dealing Team Performance Detailed Due Diligence Approval Financing Documentation Settlement Post- Completion Settlement Commercial Documentation Funding Manager Monitoring 7.2 Data Quality & Counterparty Set Up & Static Data & Security Set up and Static data 3.0 Middle Office 3.1 Trade (JP Morgan Middle Office) 3.2 Operations (AustralianSuper) Income, Margin Front Office to Middle Office to Income & Cash Commercial Financial Trade Matching OTC Lifecycle Portfolio & & Corporate Valuation & Middle Office Custodian SPV Setup Expense Forecasting / Documentation & Routing Security Setup Actions Accounting Reconciliation Reconciliation Processing (SPV) Counterparty Setup Compliance & Escalation Liquidity Implementation 6.2 Enterprise Risk Cash Forecasting & Positions Unmatched & Failed Trade Unmatched & Failed Cash Broker Performance Post-Trade Compliance Daily Performance Data Analytics & Performance & Attribution Valuation Crediting Rates Review Middle Office SPV Tax Tax Portfolio Accounting Portfolio Valuation Reconciliation 4.0 Back Office 4.1 Master Custody (JP Morgan Middle Office) Performance Crediting Rates Tax 6.3 Information Technology 7.3 Operational Risk Portfolio & Security Setup Settlement Account Setup 4.2 Settlement & Safe Keeping (JP Morgan) Custody to Trade Income Corporate Registry Settlement Processing Actions Reconciliation Custody/Unlisted Title Expense Unlisted Asset Mgt Safekeeping Processing Settlement Reconciliation Unit Registry Processing Directions Letter SuperPartners Cash Flow Member Processing 4.3 Member Administration Mercer Cash Flow Member Processing UBS Member Direct Cash Flow Member Processing 6.4 People & Culture 5.0 Third Party Providers IT Services Application Services Services Professional Services Support Services Counter Parties M/Office & B/Office Services Audit Services 7.4 Vendor Document IT Infrastructure EZE Castle Market Data Providers Property Managers Property Agents Insurance Legal Services Finance Services Tax Services Premises Infrastructure Brokers JP Morgan (Middle Office) JP Morgan (Back Office) External Audit 6.5 Legal & Compliance SuperPartners IT Other FACTSET IT File Name & Version: AustralianSuper IIMP Target Operating Model v0.15 Draft vsd Infrastructure External Fund Co- Managers Warakirri Managers Date & Time Printed: 30/07/2012 6:22:26 PM Consultants 10 Valuers Recruitment & Commercial Banks SuperPartners Administration Existing Function Modification to Existing Function New Function

11 11 Organisational Capability

12 Internal Roadmap A structured, low risk approach is being taken to allow AustralianSuper to deliver a fully functional internal management capability Fixed Interest and Cash Developed Market Equities Private Equity Phases 3-4 Internal Capability 1.Continue to migrate to a hybrid model 2.Create benefits in areas where management fees are highest and potential savings are greatest Phase 2 Build scale Emerging Markets Currency Overlays 1.Build-out Asia Strategy 2.Create internal capability in capital market activities Phase 1 Prove the model Australian Equities Infrastructure and Property 1.Develop Foundation 2.Establish and Enable Frameworks 3.Operate and Industrialise for Australian Equities, Infrastructure and Property Establish capability July 2013 July 2014 July 2015 July

13 Project Governance The delivery management of the Internal function is managed through a multi level governance structure Independent Program Assurance PMO Independent PMO Support Quality Assurance Committee Quality Assurance Technical Expertise Project Assurance Operational Governance & Risk Control Oversight AustralianSuper Team Benefits & KPI s Governance & Structure Equities Steering Committee Project Director Unlisted Assets Technology Infrastructure Middle Office Risk Organisational Impact Industry Expertise Delivery Expertise PMO Expertise PMO Team Operational Risk Expertise Governance Expertise Middle Office Expertise Various Workstream Activity 13