Best practice in investment governance

Transcription

1 Best practice in investment governance January 22-24, 2012 Peppers Moonah Links, Mornington Peninsula, VIC The fiduciary responsibility of managing members retirement income rests heavily on the trustee board. Strong governance is essential, but organisational flexibility remains important. The forum is designed specifically for the chairs of investment committees/trustee boards of major institutional investors. It will cover strategic investment issues relating to the macro-economic environment, governance and decision-making, organisational structure and internal teams, risk management as well as trends in strategic asset allocation. The agenda will be developed in consultation with the Australian Institute of Superannuation Trustees (AIST). The Chatham house rule applies to all discussions at the symposium ie all comments and remarks are off the record. This will allow a frank and open discussion/debate of key issues, including potential contentious ones. AIST CPD (Continuing Professional Development) points: Trustees attending the entire forum will be entitled to 10.5 CPD points Managers will be entitled to 7 CPD points Schedule at-a-glance Date Time Event Sun, January 22, :00-20:00 Welcome Drinks & Aussie BBQ Dinner Pebbles Restaurant, Peppers Moonah Links Mon, January 23, :45-12:30 Symposium proceedings (restricted to chairs only) 12:30-17:15 Symposium proceedings (open to managers) 18:00 Bus departure for Symposium Dinner 18:00-21:30 Symposium dinner Tues, January 24, :45-09:15 Chair-only Breakfast & Discussion * Location of Symposium: 09:30-14:00 Symposium proceedings (open to managers) 14:00-15:30 Peppers Moonah Links, Mornington Peninsula, VIC Address: Peter Thomson Drive, Fingal Victoria 3939, Australia Phone: +61 (0) Fax: +61 (0) moonah@peppers.com.au Website: Bus to Melbourne Tullamarine Airport (optional) * Other attendees will have breakfast at the café

2 Best practice in investment governance Monday, January 23, 2012 The morning session (8:45 12:30pm) is restricted to chairs of trustee board/investment committee only 8:45 Opening remarks Colin Tate, Chief Executive Officer & Group Publisher Conexus Financial Fiona Reynolds, Chief Executive Officer Australian Institute of Superannuation Trustees (AIST) 9:00 Strategic challenges facing the board Chairperson of an established company or an overseas pension fund with similar characteristics to a superannuation fund. 9:30 Framing the issues: Achieving effective investment governance Research has suggested that a strong governance framework could contribute as much as 1 2% of additional return per annum. How can trustee boards take steps to maximise their governance budget, given the available resources? Board structure and composition How should trustee boards be composed? Does size matter? Does board composition, especially the inclusion of independent trustees, affect investment performance? Decision-making How do boards create an effective framework for the delegation of investment decision-making? How can a clear separation of governing (ie trustee board) and executive (ie investment team) function be adopted with regards to asset allocation decisions? Are there potential dilemmas here, and how can they be resolved? How can the investment committee s role be aligned to this process? How do smaller funds with limited resources adapt to this framework? In-house team and resources As funds grow or merge, build their in-house teams, and look towards in-sourcing investment processes, there arise different challenges. How do you manage the in-house team in terms of performance, compensation, talent and resource allocation? It is not difficult to sack non-performing external managers, but internal human resource management presents its set of dilemmas. Complexity and uncertainty In times of market volatility, how should the governing and executive functions interact to execute timely decisions? How do boards cope with complex or opportunistic situations requiring time-sensitive decisions? What lessons are there from the GFC of 2008/9, as well as the current turmoil? Regulation What are the implications of Stronger Super and the increased regulatory role of APRA? Trustee Panel Discussion: Linda Rubinstein, Independent Director & Chair of Trustee Board AGEST Michael Rice, Chair of Investment Committee QSuper Bob Henricks, Chair of Trustee Board & Investment Committee Energy Super & Aust (Q) Super George Fishlock, Chair of Investment Committee AvSuper Chaired by: Angela Emslie, Chair of Trustee Board, HESTA; Trustee Director, CareSuper & Vision Super; Deputy President, Australian Institute of Superannuation Trustees (AIST)

3 10:45 Morning Tea Break 11:05 Fund consolidation and mergers Implications for investment strategy Super-fund mergers have continued unabated, driven largely by a desire to generate scale economies. The Cooper Review and Stronger Super reforms have only served to accelerate the pace of consolidation. But can the prospective gains from mergers and consolidation be delivered in practice? What are the key obstacles and risks to a successful integration? This session aims to raise and discuss practical perspectives on some of the key investment issues that often arise in the course of fund consolidations, including: Governance: Establishing clear decision rights and responsibilities (in the short-term and long-term) Reconciling investment beliefs, investment options and objectives Changing structures and related member equity issues Developing a game plan - 'big bang' or staged integration Integrating assets: Common traps and pitfalls Ross Barry, Head of Portfolio Construction and Diversity Towers Watson 11:50 Developing a holistic approach to liquidity risk The 2008/9 crisis gave investors a very expensive lesson on liquidity risk management. While unlisted assets helped funds generate higher risk-adjusted returns pre-crisis, the subsequent market rout severely disrupted cash flows. This was further exacerbated by irrational member behaviour. In a 2008 APRA survey of liquidity and portability, it found that only 6% of funds performed liquidity stress testing. Several funds even confused liquidity stress testing with cash flow projections. How should trustee boards incorporate liquidity management needs when setting the investment objectives and strategy? While superannuation funds are managed with a view for the long term, how do you balance that with the short term liquidity constraints? How do funds subscribe to APRA s holistic way of managing liquidity risk, and put in place appropriate stress-testing mechanisms? How can a scenario-based analysis be incorporated as part of liquidity stress testing? Possible scenarios to consider include: Who are your average members; their balances; their time to retire; their time in the fund? How do your members react, in terms of exits and switching, to both market downturns (absolute performance of your fund) and your fund s ranking (relative performance)? How does your fund s inflows compare to industry standards? What are the threats and opportunities these results bring? How will your fund s inflows look in the coming years? How will this be affected if your fund is first quartile or forth quartile in performance? How does your fund s inflows and asset allocation look under a range of stress testing scenarios such as o What happens if equity markets and currency markets fall? o What happens if your members over 55, who have balances greater than 150k, leave the fund? o What happens if inactive members auto consolidate out of your fund per the proposed Stronger Super reforms? Justin Webb, Head of Risk Access Capital Advisers Alexander Austin, Chief Executive Officer Access Capital Advisers 12:35 Luncheon

4 Open session For all trustees and managers 13:35 Dynamic asset allocation: Is it all about moving to cash now? The current volatility, somewhat characterised by the risk-on, risk-off scenario continues unabated. The crisis, coupled with uncertainty around the European sovereign debt, continues to trouble investors. Without doubt, it is tempting to shift growth assets into the cash portfolio at this time. The reality is that the annual returns from cash have been markedly higher than for Australian shares over the past 12- month and five-year periods. However, conventional investment theory will tell us that no asset class will outperform other asset classes every year, and sometimes the highest performer in any one year is the worst performer in the following year. Given the long-term nature of retirement savings, should investors simply adopt a set and forget strategic asset allocation strategy, or react to the constant changes in the market? When severe bear market conditions inflict significant pain, how do you deal with the immense pressure to do something? Should investors dynamically manage the portfolio? How can this be appropriately implemented? Panel Discussion: Rob Hogg, Head of Capital Markets Frontier Investment Consulting Brett Lazarides, Independent Director & Chair of Investment Committee Combined Fund Daniel Needham, Managing Director & Chief Investment Officer Ibbotson Associates Steven Carew, Head of Investment Research JANA Investment Advisers Chaired by: Ross Kent, Senior Managing Director Institutional Relationships AllianceBernstein 15:05 Afternoon Break 15:35 Credit investing: A macro framework to help investment committees navigate complex opportunities Continued market volatility, a contraction in bank lending and deleveraging are creating a myriad of investment opportunities across the credit spectrum. Equity investment biases are waning as credit opportunities continue to present stronger and more attractive risk adjusted return potential, but specialist skills and expertise in timing are important to tapping these opportunities. Trustees are often faced with complex choices of where in the credit spectrum they should invest...loan to own situations? Bank loans? Structured credit? Distressed Credit? This session explores a macro framework for investment committees to facilitate a risk controlled and diversified approach to tapping in to these sub investment grade credit opportunities. Hiram Hamilton, Portfolio Manager Alcentra (UK) Followed by audience roundtable discussion 16:35 Building the capabilities to capture the PE investment opportunity: Lessons from the field Private market investment opportunities are becoming more central to developed market investment houses and pension funds in particular. However, more often than not, the capabilities to fully capture this opportunity don t exist currently. A roadmap to build such capabilities can be developed and executed against resulting in a genuine first mover competitive advantage Research presentation by:

5 Nigel Andrade Partner McKinsey & Company 17:15 Close of Day 1 discussions 18:00 Bus departure for Symposium Dinner 18:30 Symposium Dinner Montalto Restaurant The symposium dinner will be held at Montalto Vineyard and Olive Grove. The restaurant has been awarded a Chef's Hat (Age Good Food Guide 2011).

6 Tuesday, January 24, :45 Chair-only Breakfast Interactive Discussion with: Ross Jones, Deputy Chairman Australian Prudential Regulation Authority 9:30 Investing in emerging markets Where? How much? How? Within the next 10 years or less, emerging markets are expected, by many global economists, to overtake the developed markets in aggregate GDP in view of their relatively robust growth rates and pent-up demand from the billions of emerging middle class consumers. In the BRIC economies alone (Brazil, Russia, India, China), there are already an estimated 800 million middle class people with purchasing power, and this number is expected to double in the next decade. In addition to the BRICs, there are several other frontier markets with critical mass and high growth rates, such as Indonesia and Turkey. However, the challenge for investors is how to access the incredible growth in the emerging markets, profitably and without excessive risks. This presentation will explore the opportunities and risks of private equity investing in a few of the largest and fast growing emerging markets, namely the BRICs (Brazil, Russia, India, China) and selected Frontier Markets (such as Indonesia, Turkey). Patricia M. Dinneen, Managing Director Siguler Guff & Company (USA) Followed by audience roundtable discussion 10:30 Morning Tea Break 10:50 Emerging market debt: coming of age? The persistent tribulations of developed economies have caused investors to re-think their fixed income portfolio strategy. Is sovereign debt, hitherto a safe haven, possibly becoming the new sub-prime? Emerging markets, on the other hand, are powering ahead. They not only survived the financial crisis, but thrived, and many of the fundamental advantages that developing countries enjoy over their developed counterparties are becoming more widely recognised by investors. Central bankers in emerging economies have endeavoured to institute independence, credibility and liquidity in the local markets, as well as facilitated broader institutional participation. This presentation will examine how emerging markets local currency debt will perform, regardless of how the events unfold in Europe and the United States. It will cover how the key sources of return will be generated and how best to utilise this asset class as part of a global portfolio. John Morton, CFA, FRM Managing Director & CIO Fixed Income Rexiter Capital Management (UK) Followed by audience roundtable discussion 11:50 Peer collaboration and co-investments Investors are increasingly looking to club together with like-minded peers, to embrace co-investment opportunities. Potentially, funds which are contemplating investing directly into private assets will face a number of unique challenges in structuring and executing those investments. What are the key issues and drivers in structuring and executing direct and co-investments, both locally and overseas? What about issues relating to cross-border transactions and multi-legal jurisdictions, tax, shareholders agreements, governance and other major regulatory issues? Does size matter? Are direct investments only available to large funds? Can smaller funds participate in co-investment deals through aggregation with other funds? Bill Fuggle, Partner Baker & McKenzie

7 12:30 Closing Remarks Gerard Noonan, President, Australian Institute of Superannuation Trustees (AIST) & Chair of Trustee Board, Media Super 12:40 Closing Luncheon 14:00 Bus to Melbourne Tullamarine Airport (90 minutes journey) Contact: Chris Rath Kirrah McClelland kirrah.mcclelland@conexusfinancial.com.au