AustralianSuper CIO Mark Delaney: More resilient, for less

Sally Rose

By

31/01/2018

CIO of the Year finalist AustralianSuper’s Mark Delaney is focused on building the investment team’s internal capabilities to reduce costs and ready the portfolio for the risk of a bear market.

Delaney has been chief investment officer and deputy chief executive at the $130 billion industry fund since its creation 12 years ago.

He is one of five finalists in the running for CIO of the Year at the 2018 Conexus Financial Superannuation Awards. Conexus Financial is the publisher of Investment Magazine, which will feature Q&As with all the finalists ahead of the announcement of the winners at a special black-tie event on March 8 at the Ivy Ballroom, Sydney.

Investment Magazine: What do you believe will prove over time to be the most significant decision you made in 2017?

Mark Delaney: Without doubt, our continued commitment to internalising investments is going to have the biggest impact on the fund and its future performance. We worked hard to reduce costs for members and we saw investment expenses drop by $11 million, or 3 per cent, in 2017, while member assets grew 20 per cent.

IM: What do you expect to pose the biggest threat to your portfolio in 2018?

MD: Given our portfolio has a growth bias, the biggest threat to it is an equity bear market. Bear markets are mainly triggered by either rising interest rates causing pain for leveraged companies, households and investors or, less frequently, by very sharp rises in energy prices.

At present, we don’t judge that the conditions are in place to trigger a bear market; however, if rates continue to rise then the risk of a material sell off in risk assets will rise but that is likely to be more of an issue for 2019 than 2018. Consequently, we are happy to maintain a growth bias for the time being.

What do you expect will be the biggest headwind to meeting your return target over the next five to 10 years?

Valuations. Our research shows that although value is not an important driver of short-term returns, the valuation on which you buy an asset is a key driver of returns over five to 10 years.

How are you repositioning the portfolio to make it more resilient?

The portfolio is naturally pretty resilient, given the mix of equity, infrastructure, property, fixed income and cash that it holds. Nevertheless, as the global monetary tightening cycle evolves over the next couple of years, it is likely that we will reduce exposure to equities and increase exposure to government bonds. We will also tilt the equity portion of the portfolio so it is invested in more defensive sectors.

Aside from investment decisions, what is taking up a lot of your time and focus at the moment?

Ensuring that AustralianSuper has the right people with the right skills to deliver for members year after year is a major focus for the whole fund. AustralianSuper has a great culture and maintaining that is important. Acting in our members’ best interests in order to help them achieve their best possible retirement outcome is our primary focus.

Other finalists in the CIO of the Year category at the 2018 Conexus Financial Superannuation Awards are Statewide Super’s Con Michalakis, Australian Ethical’s David Macri, MLC’s Jonathan Armitage, and Sunsuper’s Ian Patrick.

About the awards

The Conexus Financial Superannuation Awards recognise excellence in the industry and aim to encourage super funds to raise the bar in all aspects of their operations. The focus of the awards is to honour funds that offer products and services that will ultimately lead to better retirement outcome for members.

While there are many other awards nights on the industry calendar, the Conexus Financial Superannuation Awards are unique in that they are not aligned to a research or ratings house, and do not charge funds to participate. Actuarial and consulting firm Rice Warner assist with quantitative analysis.

The judging panel comprises CalSTRS chief investment officer Chris Ailman, Fund Executives Association Ltd chief executive Joanna Davison, CHOICE chief executive Alan Kirkland, Financial Services Council chief executive Sally Loane, Rice Warner chief executive Michael Rice, and former minister for financial services and superannuation, the Hon. Bernie Ripoll.

“There’s no shortage of commentary or opinions on super fund performance but the strength of this process is the focus on data, which removes a lot of the subjectivity,” CHOICE’s Kirkland says. “At the same time, the growing debate about the importance of effective governance has forced us to bring in some qualitative assessment of factors like this, which can’t be reduced to numbers.”

Australian Prudential Regulation Authority deputy chair Helen Rowell is a special adviser to the judging committee, which remains the only truly independent awards panel in the sector.

“APRA views sound governance practices as fundamental to the delivery of value for money outcomes for members,” Rowell says. “I was therefore very pleased to see the steps taken by the judging panel this year to enhance the approach to assessing governance practices and give it more weight in determining the winners in various categories.”

Rowell says APRA encourages all trustees to continue to improve their practices and the outcomes delivered for their members.

“Industry awards, such as the Conexus Awards, are one means for helping the industry to do this by identifying better practices in key areas,” she says.

The 2018 Conexus Financial Superannuation Awards are produced with thanks to platinum sponsor AIA Australia and event partner FEAL. All the winners will be announced at a special black-tie event on March 8 at the Ivy Ballroom, Sydney. Tickets are now available. Visit www.conexussuperawards.com.au or contact Emma Brodie via [email protected] or +61 2 9227 5708.

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