by Greg Bright
QIC, the $84 billion Queensland Government-owned fund manager, has been diversifying overseas for several years and now has a big presence, especially, in the US. But that is not all that has changed since Damien Frawley took over as chief executive in July 2012.
He said, in a wide-ranging interview recently, that the change in the firm’s operating model, which was formerly as a “house of boutiques”, was just as, or more, important. “I thought our power would come from the whole, not the individual parts,” he said.
QIC has had a presence outside of Australia for about 10 years. Roughly 200 of its 800-odd staff are based offshore. A lot of them are asset management people for the firm’s burgeoning real estate business in the US, where it owns 13 shopping malls and has offices in both Cleveland and Los Angeles. There is a private equity team in San Francisco, and an infrastructure origination team in both New York and London. The London office also houses a trading desk.
Not many of the staff are sales people – not as many as you’d think – although for its last capital raise, $2.3 billion for a global infrastructure fund, investors came from North America, Europe, Asia and Japan, as well as Australia. Of that money, about 60 per cent is expected to be deployed in Australia.
Referring to the US real estate business, Damien Frawley says: “We need to apply what we know from Australia where we have a long history of doing well. The same goes for infrastructure and private equity. In the US, there are a lot of big privately owned assets.”
The next challenge for QIC in the US market is to “think hard” about lifting its brand. “We’re playing in the big league now,” Frawley says.
The continued focus on shopping malls for its real estate business, as in Australia, is interesting in the light of lots of talk about the demise of retail shops due to e-commerce. The Lowys’ sale of Westfield last year has added to the nervousness.
But Frawley believes that, while shopping malls may be offering various products and services in the future, e-commerce will not destroy them. “It gives us great comfort that we are very disciplined in our delivery and focused on our approach which is concentrated on delivering mixed-use, experiential destinations,” he says.
“There has been a shift away from apparel-dominated shopping centres to include experiential retailers, food and beverage, dining and entertainment, services, community and cultural facilities. QIC treats our retail centres as almost town centres through integrating contrasting yet complementing real estate sectors into one large mixed-use footprint. Essential services and community facilities draw consumers, creating a unique mixed-use destination.
Frawley, a former Wallaby, was previously the managing director of BlackRock for Australia, based in Sydney. He left that firm at the end of June in 2012 to return to his native Queensland the very next day. QIC has a big Sydney office, though, and he, along with other senior executives, do a fair amount of commuting between the two cities.
The offshore expansion has had another, less quantifiable, benefit for QIC: it has given its owner something else to be proud of – a major investment firm operating on the world stage.
From time to time over the 27 years of QIC’s existence the State Government has considered various privatisations, although, to be fair, QIC was usually well down the list of priorities.
On the ownership, Frawley says: “We have arrived at where we are today because we have a big patient investor as owner and we have invested back with them.”
And while the client base has diversified beyond what was previously largely Queensland base, to now total 115 around the world, QSuper, which has its own internal investment team, remains one of QIC’s largest clients.
As part of the shift from being “a house of boutiques” to a more integrated model, QIC exited its Australian equities capability, but retained its fixed income capability, which is global in nature. The decision to exit Australian equities pre-dated Frawley’s arrival, but by way of tacit approval for the decision he says: “Would we ever go back? Not on my watch.”
Growth and globalisation has also meant a change in culture for the organisation. The broader commercial footing means a change in attitude, although Frawley says: “Our culture has been built on our heritage. As we often hear within the industry, great fund managers have great people as the people are their best assets. I have been blessed with a world-class team living in sleepy little Brisbane”.