The $9 billion profit-for-members Australian Catholic Superannuation & Retirement Fund has appointed the specialist implementation manager Parametric Portfolio Associates to run a mandate as part of the ‘RetireSmart’ strategy for a new custom-designed equities approach with a focus on capital retention and income.
Parametric will manage the equity portfolio as part of Australian Catholic Super’s pension solution. The RetireSmart strategy, launched in 2015, was designed around the concept of separate ‘cash’ and ‘growth’ buckets of assets for retirees. Parametric already manages some existing equity portfolios for the fund and collaborated to co-design the new approach to equity investing in retirement.
An income-equities strategy for retirees has taken on new importance because of the market conditions since the global financial crisis – resulting in very low interest rates – which have intensified with the Corona virus crisis where equity prices seem to be disconnected to the global economies’ slide into recession. With a specific focus on the different needs of the fund’s retired members, Parametric’s goal will be to ensure RetireSmart equities offer downside protection in falling markets and meet specific yield targets above market benchmarks to provide members with a reliable income stream.
Greg Cantor, the chief executive of Australian Catholic Super (ACSRF), believes the new approach shows some of the fund’s best attributes. He said in a statement: “We didn’t want to wait for the Government to impose its ‘CIPR’ retirement product timeline on us or the rest of the industry to really move on this. We have nearly one-third of our members in retirement, and many more making plans to retire in the very near future. This particular cohort of members have needs that, we felt, required a customised solution. We have established a reputation for innovation across the fund and we are building on this further by rethinking the investment challenge for retired members.”
Chris Briant, head of Eaton Vance Australia, Parametric’s Australia-based affiliate, said: “ACSRF has rightly recognised the need for a more thoughtful approach to equity investing for retired members, with the COVID-19 pandemic providing a stark reminder of this investment reality.” “It’s to ACSRF’s credit it has moved ahead of the industry curve by establishing the RetireSmart pension solution and continuing to enhance it… It’s to ACSRFs credit it has moved ahead of the industry curve by establishing the RetireSmart pension solution and continuing to enhance it.” He also applauded the fund’s focus member needs and prioritizing the issue. The fund and manager said they had extensive research collaboration between them over the past year to workshop different ideas. Key to this particular portfolio would be its ability to generate consistent income for its members while ensuring that capital balances are protected from market drawdowns.
Cantor said the commitment to partnership was empowering. “We seek investment partners with collaborative cultures and a willingness to customise. These are really powerful tools for us in continuing to lead the way in the retirement solution design space. Ultimately, it’s easy to ‘talk the talk’ about being focused on members, but actually delivering thoughtful new solutions like this to members, especially in these challenging investment times, shows that we really are living this principle and putting members first,” he said.