Playing to clients' uniqueness to develop investment solutions that give them a competitive advantage
Global Investment Insights
with David Surridge, Senior Consultant, JANA
David is a Senior Consultant at JANA. As one of their most senior and respected consultants, David looks after JANA’s most important clients, providing research and advice to some of Australia’s largest superannuation and government funds. He is also a member of JANA’s Portfolio Construction and Australian Equities Research Teams.
David joined JANA from the New Zealand Superannuation Fund in June 2016 where he was a Senior Investment Strategist responsible for research and tactical asset allocation decisions. Prior to that, he was a Portfolio Manager at Dimensional Fund Advisers.
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On the investment side, what has worked well in the past is unlikely to be the solution going forward.
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“I have been fortunate enough to work for some great organisations over the years, but, more importantly, I have had the opportunity to work in varying roles throughout the industry including back office, middle office, and client-facing positions. I believe this breadth of experience has been hugely beneficial to me in understanding the investment process as a whole and I would encourage people entering the industry to get exposure to as many aspects of the industry as possible. You never know what you will like, so do not be afraid to try something different”, David shared.
Currently, amid the heightened regulatory environment, the focus of David’s role centres around helping clients navigate the myriad of new and existing legislation and fund requirements, from SPS 515, APRA Heat Maps, the impending Your Future, Your Super legislation, Retirement Adequacy, and ESG and climate change risks.
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Investment outcomes are likely to be lower in the future, that does not mean we simply accept lower returns.
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“Overarching this though, is the new investment environment characterised by ultra-low rates, abundant liquidity, and now, significant fiscal stimulus. Pulling all this together, while trying to achieve better investment outcomes, is a complex task that requires different approaches across a diverse client base”, David highlighted.
He continued, “on the regulatory side, it means supporting our clients in continuing to do what is in the best interest of clients and their members. On the investment side, it means what has worked well in the past is unlikely to be the solution going forward. Further to this, we are discussing with clients that future investment outcomes are likely to be lower, though that does not mean simply accepting lower returns, as our aim is to seek more innovative solutions that enable better client outcomes.”
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The low-rate environment is forcing investors to find innovative solutions to replace the role that fixed income has traditionally played in portfolios.
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However, despite the increased regulatory burden on clients, there are always reasons to be optimistic about the future of investing, in David’s opinion.
He explained, “one of the challenges asset consultants face is the constantly changing investment environment overlayed with changing regulation. It means that we are continually having to think of new ways to enhance investment outcomes.
I am somewhat excited about the low-rate environment that we are facing over the medium- term, as it is forcing investors to find innovative solutions that can replace the role that fixed income has traditionally played in portfolios.
We are also helping clients seek out more niche and esoteric investments that play to their strengths. It is not a one size fits all approach – now, more than ever, it is important to help clients utilise their uniqueness. Clients of varying sizes have unique advantages and we try to play to their strengths. For smaller sized clients I am excited about the solutions that we are coming up with to help them compete against the larger funds and stay relevant, in a very competitive environment.”
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Clients of varying sizes have unique advantages and we are helping them seek out more niche and esoteric investments that play to their strengths.
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According to David, there are two main challenges facing the institutional investors community, namely:
The ever-changing regulatory environment, which can lead to losing focus on what matters most, improving member outcomes; and,
The current investment environment where valuations look stretched across almost all long duration assets. This has resulted in very strong past returns through Central bank actions taken in the wake of the GFC. Now, much larger monetary policy intervention, coupled with fiscal policy support from Governments, is having the dual impact of first forcing investors into these long duration assets, but at the same time making investors extremely nervous about what the implications are going to be of a system awash with liquidity.
“I think the institutional investor community is doing a very good job at navigating the changing environment, though one of the disappointing aspects of some of the regulation we are now seeing is that it is likely to stifle innovation. Fund memberships are diverse, so unique approaches tailored to those memberships are often required, but the hurdle now for certain types of investments are becoming too high, and the penalties too severe for missteps”, David highlighted.
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One of the disappointing aspects of some of the regulation we are now seeing is that it is likely to stifle innovation.
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In terms of investment opportunities on the horizon, David sees impact investing as an exciting area that is going to continue to see a growing investor base. “Done right, investors can still achieve strong returns across the capital stack, whilst simultaneously having a positive impact on the environment and society”, David remarked.
“Emerging market debt is more of a niche area that sophisticated investors can access, though it is probably best accessed through a specialist manager, geographically situated near the assets”, David opined.
He continued, “I believe we are also going to see more derivative based investment solutions, particularly because of the lower return environment, but also as clients become more sophisticated about how they implement portfolios. Multi-asset class portfolios are going to look very different three years from now, compared to how they look today.”
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Multi-asset class portfolios are going to look very different three years from now, compared to how they look today.
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