NSW TCorp, the largest fiduciary investment fund in the State, has completed its two-year re-build and started to expand its asset base beyond the three funds which amalgamated to form the new organisation in July 2015.
TCorp now has about $90 billion under management and should be close to the $100 billion mark by the end of this year, given the expected growth of a couple of its new funds – the $20 billion NSW Infrastructure Future Fund (NIFF) and the smaller $1 billion Social and Affordable Housing Fund, extra funds from existing partners such as STC (State Super) for unlisted assets and new clients such as the Energy Industries Super Scheme, with a fixed income mandate.
The re-build under new chief executive David Deverall has been a big project designed to take advantage of the benefits of both scale and scope in bringing together the old NSW TCorp funds and financial markets operation, the $35 billion STC closed fund and the $17 billion iCare, which is the new name for the insurance funds such as NSW WorkCover, the Lifetime Care and Support Fund (mainly for motor vehicle accident victims) and smaller funds such as the Dust Diseases Authority.
“The amalgamation of the investment functions of the three main entities has allowed for increased efficiencies because of the greater scale and, using similar logic, increased scope in our operations,” Deverall said. “For example, with ESG, we can dedicate a whole new resource to its research and applications, whereas previously we may have just had part-time management of ESG. Another is direct asset investing, which can be very time intensive.”
He believes that TCorp has about 80 per cent of the available market in managing money for funds which are in the NSW Government “family”.
He says that the three main goals of the organisation are to:
- be regarded as a best-in-class provider of financial management and advice
- be sought after by clients for the capability of its people and the way they conduct themselves, and
- have a sustainable and aligned organisation always delivering “whole-of-state” solutions.
The restructure has involved the creation of seven business units, all of which report directly to him, and five of which included the recruitment of new people to the organisation. Deverall’s seven direct reports are: Stewart Brentnall, the CIO; Jonathan Green, the general manager investment implementation and operations; Paul Verschuer, general manager of financial markets; Katharine Seymour, general manager of client relationships; Kevin Masling, chief risk officer; Paul Smith, COO; and, Katy McDonald, general manager of people and workplace.
The structure of the investment team under Brentnall, recruited from ANZ in April, is five units consisting of: investment strategy and asset allocation; equities; defensive assets; real assets; and, stewardship, which includes ESG, proxy voting and manager engagement.
The structure allows for TCorp to provide bespoke funds management services such that the different liabilities profiles of each client can be catered for in an outcome-oriented strategy.
Brentnall uses the analogy of creating a “state-of-the-art kitchen” which services distinct “restaurants”, represented by different portfolios. He manages 13 portfolios.
“We recognised that going from a $15 billion fund [the old TCorp]to a $90 billion fund required strong governance,” he says. One of the things which has changed under the amalgamation is the more efficient and timely exercise of decision rights. A decision on a fund manager, for instance, which may have taken months previously, can now be made and implemented within days.
The board looks at all big decisions from the starting point of: “what would we do if we didn’t have an internal investment team?” Brentnall says: “We have to be aware of what our comparative advantages are and what we can do better on a sustainable basis, for example. The way we look at individual liabilities is a comparative advantage.”
Having settled on his structure and strategy, Brentnall is now looking to do a “deep dive” in TCorp’s investment processes
“We recognise that our clients are long-term investors which have their strategic asset allocation (SAA) and basic flavours of risk which we want to construct in the most efficient way,” he says. “It’s not sequential, where we start with SAA, and then do DAA (dynamic asset allocation) and then manager selection. We look at them all at once, which therefore means we have to build a great data platform.”
He says that while TCorp has its investment beliefs, it is not restricted to any particular investment style for the sake of it.
TCorp has about 120 clients, including those of its $60 billion financial markets (NSW Government loans) area, although the top five accounts for at least 95 per cent of its funds under management. It has settled down to a staff of about 175, including about 60 investment professionals (front office and operations).
– Greg Bright