A key principle for Suncorp is it retains accountability, even when investment operations responsibilities are outsourced to providers.
This lesson was reinforced by a bad experience with its custodian. There was a gap between the fund’s expectations and what the custodian was able to deliver, which led to an “awful lot of angst”, according to Brendan Casey, head of chief investment office operations at Suncorp.
“You can outsource the responsibility, but not the accountability. A key part for me [is to ensure] there are efficient resources internally to exercise effective oversight over providers, whether custodians, service providers, transition mangers or fund managers,” Casey said.
Suncorp investment operations has been undergoing a transformation over the past three years. The team looks after internal clients of Suncorp, including superannuation and insurance, to the value of approximately $22 billion.
When it started the process in 2013 it was one of the last large funds to outsource its administration and custody operations. However, upon drilling down, the fund discovered there were some aspects that couldn’t be outsourced, because either it needed the asset owner to make a decision, or they provided oversight to other functions.
The next big part of the transformation took place in 2014, when the team moved from providing an advice function to providing implementation functions.
Previously, all the internal clients had their own relationships with external fund managers, but the decision was made to run it through the chief investment office, thereby adding value to the relationships.
One of the biggest changes occurred last year, when the office moved from a single manager to a multimanager strategy.
“In terms of implementation, that’s not a trivial thing to do. If you have one manager they can more or less do everything for you. With multiple managers you need to bring a lot of implementation in-house. We need to have transition management panel, overlay manager, to be able to do all the cash flow and rebalancing, [and] to be able to do due diligence,” Casey said.
As a result of this transformation, the team has grown from one to 18 members.
“Now we have a number of teams. There’s investment operations, investment implementation, governance, risk and compliance, performance, risk and reporting, technology and finance planning and project management.”