AustralianSuper brings investment expertise in-house

AustralianSuper has announced it will establish an in-house Australian equities team in a bid to reduce cost pressures.

It said up to 30 per cent of funds would be managed internally in five years time.

The superannuation fund will recruit up to 20 investment staff over 2012 and 2013, with an internal Australian equities management team expected to be up and running by mid next year and the fund's investment model morphed into a hybrid internal/external management team.

AustralianSuper's head of investment operations Peter Curtis said 14 new recruits would join the internal management team in a mix of roles including stock selection, 'back office' staff in operations, finance and legal, as well as to bolster its various portfolios.

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AustralianSuper's head of equities Innes McKeand, who will be responsible for the establishment of the internal Australian equities management team, said the fund's scale would help it transition to the hybrid model. He said it would target a cost reduction of 10 basis points per annum over five to seven years.

"Internal investing is an excellent opportunity for a fund our size to extract further value from the portfolio, and global studies show that internal investment management typically costs three times less than external management for a similar return outcome," he said.

With $46 billion in funds under management, AustralianSuper expects to increase to $100 billion by 2016, boosted by $11 billion net inflows predicted from the AGEST merger and IBM transition.

Internal management will also give the superannuation fund greater control over its investing and increased access to preferred asset classes, according to McKeand.

AustralianSuper has slowly been building its internal investment expertise. It signed McKeand to the fund in August, and Mark Tierney joined as investment manager for the fund's macro and portfolio construction team last month after 12 years with Macquarie Bank as an international economist.