The changing asset mix and the importance of a differentiated offering in an evolving operating environment
Global Investment Insights
with Geraldine Barlow, Independent (non-executive) Investment Committee Member, Future Super & Centric Wealth
Geraldine is currently a non-executive member on a number of investment committees as well as undertaking a range of consulting assignments for some Australian and offshore organisations. In this capacity, across the range of organisations she is involved with, Geraldine’s main two areas of strategic focus have been providing input on investment philosophy and strategy.
“I am a firm believer that a well defined and articulated strategy, whether it be at the business or portfolio level, is one of the most critical elements to success. Having the right people in place is also an integral element to enabling the effective execution of that strategy. It is also important to ensure that once the right strategy has been set, that the governance and delegation framework support the efficient execution of the strategy”, Geraldine opined.
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A well defined and articulated strategy, whether it be at the business or portfolio level, is one of the most critical elements to success.
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Being in the unique position of having worked across the institutional and retail investment sectors, Geraldine highlighted a couple of important areas of structural change in Australia that if addressed, would be beneficial to members and beneficiaries.
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In superannuation the focus on lowest cost outcomes may not always produce the optimal outcome for beneficiaries, as a number of other important elements may be foregone in pursuit of achieving that goal.
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From an investment perspective, Geraldine believes that the focus on lowest cost outcomes in superannuation may not always produce the optimal outcome for beneficiaries, as a number of other important elements may be foregone in pursuit of achieving that goal (of attaining lowest cost). She also believes it may create counter-intuitive and sub-optimal investment choices. “I think further improvement is required from all sides of the industry to ensure the Your Future, Your Super regulations truly align to delivering best outcomes for members. While there will be considerable economies of scale achieved in the current and future aggregation of superannuation funds, I believe its still important to have a number of differentiated member offerings in the market”, Geraldine shared.
When asked about the retail funds management landscape, “all parties (investor, research house, platform, investment manager) could really benefit from re-considering the conflicts (perceived or real) that currently exist with research being paid for by investment managers or their trustees.”
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Asset owners across the globe have been increasing their allocations to private markets. A trend that is only likely to increase, given the search for yield.
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The asset allocation mix for many asset owners across the globe will likely see a continued increase in allocations to private markets. “In my view this trend is only likely to increase given the search for yield, and the attractive capital market features of these investments relative to public markets including diversification benefits, access to alpha through manager selection in less efficient markets, and a potential illiquidity premium”, Geraldine highlighted.
She explained that this shift is now occurring in private wealth and family office portfolios, and is starting to be recognised in retail investor portfolios, although their available choices to date in Australia have largely been limited to unlisted property. “I also believe there will be a substitution from traditional fixed income into private credit as the depth of the private credit market improves, particularly domestically”, Geraldine opined.
The mergers in the superannuation industry will likely bring about some strategic re-thinking in terms of the appropriate domestic/international public equity mix, leading to a possible lower home country bias”, Geraldine concluded.
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There will be a substitution from traditional fixed income into private credit as the depth of the private credit market improves, particularly domestically.
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That said, there are a number of key emerging trends that make the future of investing exciting in Gerladine’s opinion and, she highlighted three in particular:
The first thematic that is becoming increasingly important is the change in behaviours, shift in investment preferences, combined with the innovation that is occurring, with the desire to reduce the economic and social impacts of climate change.
The second thematic that, is driving real change, in my view, relates to four linked areas in healthcare, those being; the ageing population; the rise of chronic disease; a focus on mental health; and, wellbeing and the social infrastructure gap. Significant transformation and investment of capital is required to address these areas and I am particularly passionate about this, having created a first of its kind investment vehicle to lead this change in Australia.
The third area that excites me about the future of investments is the disruptive impact of technology on the investment landscape across all asset classes. I believe this will be transformational even in my lifetime.
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Mergers in the superannuation industry could possibly lead to a lower home country bias.
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Geraldine left us with some perspectives on her career which served her well on her journey, and which may act as practical advice to others looking to forge their career path in the investment industry.
She shared, ”I have been fortunate in my career to do a lot of different things including, working domestically and offshore, working in and leading teams across all the asset management functions (acquisitions, asset management portfolio management, sales and distribution), investing and leading teams across all asset major asset classes and investing on behalf of most investor types. I never tire of learning and I enjoy being a generalist. With these choices available there are some important other filters for her,” I am a strong believer in defining and doing what you enjoy; ensuring the culture of an organisation and its leadership aligns with your values; working with genuine people is hard to come by in our industry, and much sought after; and, in my case, I always enjoy making sure there are good challenges to tackle in a role! The rest is easy.”
Disclaimer
The views expressed in this publication are solely those of the individual and do not reflect those of their employer organisation.
All information contained within this publication is general advice only, as the knowledge levels and needs of all individual and corporate investors vary greatly this publication should not be used solely as a decision-making tool, further opinions and information should be sought before making an investment decision. It is the recommendation of Global Investment Institute (GII) that you seek the opinions of a fee-for-service, independent investment adviser before making any investment decision.
The authors, directors or guest writers may have a financial interest as investors, trustees or directors in investments discussed or recommended in this document. It has been assessed by the editors that these financial interests have not had an impact on the material contained here within.
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