While investment professionals might have once stuck to their lane in terms of funds management or superannuation, the rise of Australia’s mega super funds has fuelled rapid change in the industry, giving rise to more opportunities than ever before.
There has been a trend in the super space in the last few years to bring investment in-house as a way to cut down costs compared to external management.
Earlier this year, HESTA announced it had reached 10 per cent internalisation and was targeting 15 per cent.
Similarly, Cbus’ five-year strategy includes managing 50 per cent of assets internally by 2028.
Meanwhile, over 70 per cent of UniSuper’s funds under management are already managed in-house.
However, there are other funds, most notably Hostplus, which have bucked the trend with no inclination towards internalisation.
Speaking at the CFA Societies Australia Investment Conference in October, super veteran and former Funds SA chief executive, Jo Townsend, shared her observations on this trend, drawing on her three decades of experience in the industry.
“From an investment perspective, when I first went into superannuation, you either worked in investment management or you worked in superannuation and you didn’t get much crossover between the two,” Townsend told audience members in Sydney.
“That has completely changed these days with some of the big superannuation funds, so you no longer need to get a graduate role inside of an investment manager to actually manage money directly.
“That’s a dynamic that I think is really interesting for the young people that are actually joining the industry.”
Weighing in on the trend, Kaizen Recruitment managing director, Matt McGilton, agreed the pool of opportunities for an investment professional has certainly expanded.
“The industry has evolved and changed rapidly. Once upon a time, if you were in a traditional funds management business, you might have scoffed at the idea of moving into super. They were always separate but now you’ve got these mega funds with AustralianSuper, Aware Super - huge portfolios, huge investment teams, and those investment professionals are incredibly capable,” McGilton told Super Review.
AustralianSuper, the country’s largest fund, manages more than $300 billion in members’ retirement savings on behalf of more than 3.2 million members while Aware Super manages around $160 billion in savings for more than 1 million members.
McGilton said super funds also stood out as they are often seeking to hire specialist roles that may be less needed in the fund management space and present opportunities for career progression.
“For example, we are recruiting for a smaller fund at the moment, where the teams are 10–12, and they want this person to also help out with a custody transition. I think that’s a great opportunity because you can actually see the impact of your work, you can understand the complete process,” McGilton said.
“What typically happens in the larger funds is [that] it’s a niche, specialist skill that’s in demand, say a focus on ESG in private markets, or a certain component of the fixed income universe, and that’s making recruitment challenging.”
However, with the greater focus on needing fund management talent comes the problem of pay and how much funds are willing to pay to retain top talent. Not only are salaries higher in funds management, the funds have to contend with whether paying large wages aligns with members’ interests.
The salary range in portfolio management varies anywhere between $200,000 and $330,000, according to Kaizen’s salary guide.
“Funds like AustralianSuper seem to have lost that narrative. It just seems to be, ‘We’re big, we’re growing, and we’ll pay whatever we need to for people.’ With a smaller fund like HESTA, it’s really trying to hang onto a values alignment, but even a fund like HESTA is realising they’re having to pay bonuses to attract and retain key investment people,” McGilton said.
“After COVID-19, there was a lack of supply, so demand’s high, quality supply is low [and] it’s had a genuine increase in salaries and typically a lot of headhunting from different funds to another.”
Previously, HESTA chief investment officer, Sonya Sawtell-Rickson, told Super Review the $74 billion fund’s climate focus often attracted candidates to HESTA.
“Retention is a key element and I think we have done a great job at being purpose-driven and focused for our members and our willingness to be gutsy advocates has helped us to attract aligned individuals,” Sawtell-Rickson said.
“We get a lot of people who are later in their careers and want to give back, mostly coming from asset managers, as well as young people who are passionate about climate change and doing meaningful work.”
As well as their large size, AustralianSuper and Aware Super also hold international offices, based in London. AustralianSuper has forecast growth of over $500 billion over the next five years, deploying almost 70 per cent of its growing inflows into global markets.
Similarly, Aware Super expects to reach about $250 billion by 2025–26 and have 30–40 staff at the London office within the next few years, having opened the office earlier this year.
Given the lack of superannuation system in the United Kingdom, funds are often opting to move existing staff over to London to run these divisions rather than hire candidates overseas, presenting an attractive progression move for staff.
According to McGilton, these international expansions are an “amazing opportunity” for Australians working at these funds to move overseas.
“When we speak to these funds, we’ve been asking them how their international expansion is going and I think the challenge there is they’re a little bit of an unknown brand in those markets. But we also know a lot of funds have asked people in their Australian business to move overseas and lead up that function,” McGilton said.
“It’s an amazing opportunity for your career [and] many have taken that chance to do it.
“In addition to that, funds are recruiting in local markets, and what I’ve heard from talent acquisition people in these teams, it’s been a bit of a challenge around understanding local market conditions. What is a normal salary? What is a normal bonus?
“It’s an exciting stage of growth for these funds, but I think it is going to take some time to get that international expansion model right.”