Hostplus will be working more closely with Citi as custodians are pivotal in setting investment strategy, says Greg Clerk, head of investment strategy at Hostplus.
Clerk, who started in the role in March, is examining the $18 billion super fund’s relationship with service providers as part of his remit to develop investment strategy, portfolio construction, asset allocation strategies, manager selection and make other investment-related decisions.
As well as looking to renegotiate fee structures with managers and to continue to gain insights from the super fund’s consultant (JANA), he sees a closer relationship with the custodian as being beneficial.
“What has really changed with the middle office, and especially with regards to custodians, is the fact that the fundamental information that I want to know about in the portfolio is primarily held by the custodians – the stock level holdings,” Clerk said.
He added he was after data, understanding of the super fund’s holding, how the whole portfolio is put together, as well as what would be good to have more or less of, what makes the portfolio more robust, and what improves long-term outcomes for members.
“These are all naturally data related and custodians are pivotal at the moment to bring a lot of those things to people like myself. Whether that’s in the form of data warehouses, analytical tools, portfolio analytics and the like; these are certainly things that custodians are well-placed to deliver.
“We will certainly be working with Citi to unlock some of the value in that part of their service.”
Young demographic offers huge potential
In particular, Clerk is looking for insights into how to capitalise on Hostplus’s incredibly young demographic.
“The very fact that our members have that demographic is highly attractive to me. It means I can invest over the long-term, I can tolerate a lot of illiquidity and hopefully I can use those attributes to build far stronger and better retirement outcomes for members.”
On the subject of fund managers, Clerk was not looking to change the number the super funds used, but rather to change the relationship.
“This is a fund that does not mind paying fees where you are achieving clear manager alpha. A lot the discussion is going to be based on making sure that managers are appropriately remunerated for the delivery,” he said.
“That is the key in all this. If what you are delivering is an amalgam of alpha and risk and potentially beta, I don’t think we need to pay you full rate for that, we should be paying you a different price.
“There are a lot of ways we can look at the fee puzzle, but the current state of affairs can’t maintain.”
Prior to this role Clerk worked for 17 years at JANA, where he provided consulting and investment advice to a variety of superannuation funds (with the main fund being Hostplus). Within JANA, he held a variety of roles including heading up the quantitative analytics, information technology and custody teams. Clerk holds a Doctorate in Theoretical Physics from the University of Melbourne.