Richard Brandweiner, chief investment officer of the $53 billion First State Super is a finalist for the Chief Investment Officer of the Year at the Conexus Financial Superannuation Awards. His courage and ability to create change – in investments, processes and team management – combined with a sense of purpose that is clearly focused on the member are what sets him apart.
Brandweiner’s passion is deep and pervasive and he naturally reflects the over-riding philosophy of everyone who works at First State Super – that there is a higher purpose in what they do; that managing money for other people is a privilege and a responsibility.
“What struck me most when I came to work at First State Super – and I knew it intellectually but didn’t get it emotionally – that having a single focus on the member is liberating,” he says. “The sense of purpose is palpable.”
Brandweiner, who came to the job from Perpetual in April 2013, says his strength and skill is in creating change and bringing the vision to bare.
He says he is fortunate to work in an extremely rewarding environment, with support from the board and chief executive Michael Dwyer, to develop a framework for a large asset owner to be best of breed.
“I’m excited by the fact we can do things differently and get to the point where we are one of the best in the world,” he says.
Brandweiner’s impact has been immediate and a lot has changed in the First State Super investments approach in the three years since his arrival, including the building out of a highly skilled team, adding diversification to the portfolio via a significant private assets allocation, systems for risk management, analysis and decision making, a new operating system, and the move to internal investment management.
“I see that there are three major challenges of a large asset owner: the benefits of scale are absorbed by agents; agency risk – there are seven or eight levels between the member and the widgets; and information asymmetry where the asset owner is removed from capital markets,” he says.
Brandweiner and the team are presenting part three of their “roadmap to $70 billion” to the board this year, and they started that process by understanding how the fund could deal with these three challenges.
“We looked at what was culturally aligned and what was the competitive advantage of our own organisation,” he says. Internal investment management emerged as one way to deal with these issues, alongside the restructuring of fund manager partnerships, and direct relationships with companies is another way.
First State Super will be managing Australian equities by the end of the year, with the focus for internalisation around creating the choice to execute ideas in various ways.
“We will always be both – internal and external – because it’s about options. Internal is about giving us different ways to execute on an idea through exposure management, starting from strategic asset allocation, active asset allocation, factor exposure management, long-term strategic holdings in infrastructure unlisted and even listed companies. Those things should be a core skill of us, the generator of alpha doesn’t have to be within the fund,” he says.
First State Super, under Brandweiner’s steer, is not afraid to go direct to companies, and will even take strategic stakes in listed companies. In fact it already does, owning 41 per cent of a listed Australian company, through a private equity turnaround.
Inefficiency is a key focus for Brandweiner, and this is not just about portfolio construction but also implementation and addressing the agency risks through the restructuring relationships with intermediaries.
This has started with the fund’s large relationships, and it has co-invested with Lend Lease in Barangaroo and the CBA building in Sydney.
“We want to build networks to get a competitive advantage and that will be with managers but also investment banks, legal firms, and peers,” he says.
“This is an interesting point of evolution for asset owners as they are more sophisticated and corporate Australia is looking for capital. Historically there was a range of intermediaries between them which meant leakage and not necessarily alignment. Companies are now realising we control the capital.”
Universal ownership is an input into the decision making at First State Super, and Brandweiner believes that whether asset owners like it or not they will have an impact on the future. So they may as well embrace it.
The investment team is developing a scoring mechanism to filter ideas, and universal ownership is one of eight levers. “We need to be mindful of it,” he says.
Brandweiner is a member of the Australian Advisory Board for the International Social Impact Investment Taskforce. He is also an immediate past president of the CFA Society (Sydney) and takes a week out of every year to go to Charlottesville Virginia to mark level III exam papers.
The winners of the Conexus Financial Superannuation Awards 2016 will be unveiled at a special black tie event at Palladium at Crown, Melbourne, on March 3, 2016, which is being sponsored by AIA and Vanguard. You can purchase tables of ten or single tickets by clicking here.
Conexus Financial has drawn on its extensive contacts and resources to involve an esteemed list if VIPs to present the awards and further honour the important contribution the superannuation sector makes to Australian society and the economy.