Engineered equities is a paradigm change that will be a 10 to 20 year phenomenon and is no longer thought of as a fad, said Northern Trust.
The asset servicing firm said the interest in engineered equities, or smartbeta, has picked up steam in the last three to four years in Australia and is tied for second with the US interest wise, and Europe taking up the most demand.
Northern Trust's managing director for global equity, Matt Peron, told Super Review the problems the Australian market face surrounds finding the ability to efficiently enhance returns.
"People are taking a step back and looking across the plan and asking 'how can I optimise the mix of strategies?' They're forming a way to move from active management to more factor based strategies, it's a very topical conversation right now," Peron said.
Peron said the Australian market is now entering a new phase of early implementation after moving from education on factor exposure and benefits on implementing systematically either passive or factor exposure.
"Now people are entering the implementation stage so we're starting to see big plans, really make meaningful steps and that has started to take hold in Australia," he said.
"We're seeing two to three per cent of the portfolio being implemented with this strategy and then stage three would be when they really go in and it becomes the dominant part of their portfolio. I believe that will happen in a few years."
Head of Australia and New Zealand Asset Management, Bert Rebelo, said there were also issues around risk budget and the fees being paid.
"It's looking at greater efficiencies and getting more bang for your buck. Ultimately they're doing what they think is best for their members and seeing what is most risk efficient and best performing for fees outcome." Rebelo said.
BlackRock boss Larry Fink praised Australia’s superannuation system in his annual chairman’s letter.
The prudential regulator has announced it will publish new expenditure data of superannuation funds, providing details on expenses like advice, director remuneration, and payments to unions.
Affirming the UK’s growing attractiveness as an investment destination, a number of Australia’s largest investors recently joined the UK Foreign Secretary for an exclusive briefing in Canberra to discuss further opportunities for trade and growth.
The specialist superannuation law advisory practice is set to wind up, with managing partner Jonathan Steffanoni planning to bring a new offering to market.
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