61: AustralianSuper's Alistair Barker – asset allocation, YSYF and Disruption

[i3] Institutional Investment Podcast

Alistair Barker is the Head of Total Portfolio Management, Investments for AustralianSuper, one of the largest pension funds in the country at $200 billion. In this episode, we spoke about dynamic asset allocation, the impact of the Your Future, Your Super reforms on active management and technological disruption. Please enjoy the show. 1:00 Starting out as a intern without pay 3:00 Working at Hastings and learnings from the early days 4:30 In funds management it is not about the quantity of decisions; it is about the quality of decision making 5:00 Investing with Raphael Arndt in a series of gas pipeline assets 6:25 “If you are not paying for things that might potentially provide future upside, then those are usually the best deals.” 7:30 Starting at AustralianSuper in a hybrid role of private market investments and portfolio strategy 10:00 “Early on in my career, AustralianSuper decided to bulk up with internal investment teams” 13:00 Does internalisation of asset management change the culture or create a clash of cultures? 16:00 “A number agency issues disappear with internal management.” 17:00 “My title change reflected more that there was now a term in the industry that reflected what I’ve been doing for a number of years [rather than a new focus on total portfolio management].” 19:00 “The challenge of a multi-strategy setup is that too often you have great ideas that just don’t have any impact on the total portfolio.” 21:00 A risk budget implies a number that needs to be spent. For us it is more about a range of risk taking depending on where we are in the cycle. 25:00 DAA is important at all times, not just in periods of distress such as a pandemic, because you never know when it is going to pay off. 30:30 The role of bonds is to diversify from equities. So what sort of risks are we worried about that we need to diversify against? 33:00 Losing your control over the portfolios liquidity leads you to a path-dependent outcome where you might be a forced seller of a particular asset class 34:00 Our portfolio liquidity is set at a level that we can buy the most attractive assets at the bottom of the market. 34:30 Liquidity is the key enabler by which to affect the asset allocation and you don’t want to lose control of that 36:00 We had a university student do a thesis on member switching and they found that over 60 per cent of switching detracted value 37:00 We want every member to be engaged with their super, but not so engaged that they log on every day to see what their unit price is doing 38:40 If you are not selling your equity portfolio tomorrow, then why are you worried about what it is worth today? Intrinsic value manifests over time. 40:00 Your Future, Your Super reforms: are you concerned about how it affects your ability to invest in active management? 41:30 I testified in front of the productivity committee and said that benchmarking helps 43:30 What benchmarking has taught us is that you get rid of active management that is redundant. Not necessarily, poor active managers, but those who are diversified away at a total portfolio level. 46:00 Working at Stanford with Ashby Monk on technological disruption 47:00 Technological disruption is not new, but it is often not captured by risk models 48:00 Often people think that to protect against technological disruption you just buy a bunch of venture funds. Well, venture is never going to be big enough to make a difference. 50:30 If you see what you have to pay for renewable energy assets today, it not only prices in carbon risk, but it also presumes there won’t be any new technology. 51:00 Are there similarities between the early days of the internet and what is happening now in crypto? 53:00 Getting involved in venture capital 54:30 Using big data to make Indian corner shops more profitable