CBA fund revamp: Gerard Parlevliet bows out in style

by Greg Bright

Gerard Parlevliet, the CIO and long-standing driving force behind Commonwealth Bank Group Super, retires this week after 38 years with the bank, 23 of them in the staff superannuation team. But not before he oversaw a significant restructure of the $10.6 billion portfolio.

The fund, generally known as Group Super, recently completed an investments review and implementation process, which started with a board strategy session in 2015. The broad thrust of the review was to improve the robustness of the investment strategy in what is expected to be a “lower for longer” investment outlook. The review was also aligned to their investment philosophy of delivering sustainable long-term returns that achieved their set investment objectives.

This in effect, further emphasized their long held view of managing against outcome orientated objectives rather than market benchmarks (the usual benchmarks) . As a result of the review, the following changes were made to Group Super’s diversified options:

  • Renaming and regrouping of asset classes;
  • Reweighting of asset allocation benchmarks and ranges; and
  • Increase in the allocation of investments with multi-asset managers, real assets and alternatives.

A key upshot of these changes was a large and new allocation to multi-asset managers, from 10 per cent to 25 per cent of the fund’s MySuper option. The shift, funded out of both equities and bonds, meant the appointment of two new managers: , Insight Investment, the UK-based BNY Mellon affiliate which has a long-established Australian presence, and Newton Investment Management, also based in the UK. In explaining this change, Parlevliet indicated that the appointment of these managers introduced the ability to better target the reward for risk that is on offer at each point in time, thereby introducing greater flexibility and agility to achieve objectives with less volatility and downside risk. The two managers who started the multi-asset program for the fund a few years ago, Schroder and AQR, continue to be retained.

The second major change was the introduction of “liquid alternatives” into the investment strategy to be managed by GAM International through it’s risk premia strategy. GAM is arguably the first global manager to develop a robust investment strategy based on risk premia management, which is now more generally referred to as ‘factor investing’. Parlevliet indicated that the experience of the GAM team and their ability to construct and risk manage a total portfolio of risk premia strategies was a key consideration in their appointment.

Another, more fundamental change for the fund, was a move away from thinking according to the traditional asset allocation buckets of Aussie equities, international equities, property, fixed income and cash. Instead, they chose the following categories as building blocks for the revised strategies: equities (both Aussie and international); fixed income and cash; multi-asset; alternatives, which includes the risk premia capture; and real assets, such as infrastructure, property and agriculture.

While the fund’s asset consulting firm, Willis Towers Watson, played a major role in assisting the Group Super investment team in developing the new strategy, interestingly the fund used the specialist search firm bfinance in the process for selecting the multi-asset managers. bfinance, which opened an Australian office last year, charges the managers rather than the fund for its services, which tends to be more of a quantitative nature than the processes used by traditional asset consultants. Parlevliet explained that they used bfinance as a means of seeking expressions of interest from as broad a manager universe as possible, especially given that bfinance knew the universe has been rapidly expanding in recent years.

The fund, which still has about 35 per cent of its assets in defined benefit accounts, has always placed a high importance on governance. This has led to the recent introduction of a 3x3x3 Board structure lead by independent chair, Neil Cochrane. In an interview last week, Group Super’s CEO, Doug Carmichael, explained the move to the appointment of three independent’s on Group Super’s board and proudly reflected on the gender diversity on his board, which has five female directors.

In response to questions regarding Parlevliet’s contribution to Group Super, Carmichael says: “Group Super has had an outstanding performance record under Gerard. Over the long term, Group Super has been placed as one of the top performing super funds in Australia during his tenure. This is a testament to his leadership, investment experience and judgement on complex financial issues. It is also a reflection of the capable and experienced team and strong investment process that operates within Group Super.”

In addition to the excellent long-term investment returns, Carmichael also called out Parlevliet’s efforts in working with Colonial First State (CFS) to take on Group Super’s member administration which at the time was being performed in the bank’s broader operations centre. “This brought us into the modern age and enabled us to leverage off the excellent platform that exists within CFS for delivery of these services while continuing to run our own investment strategies,” he says.

“Another interesting fact is that, thanks largely to Gerard’s efforts, all the members who no longer work for the bank – which is about half of the membership base – continue to get the same benefits and services as members who remain employees.” In effect, through Parlevliet’s efforts, a person who joins Group Super through their employment relationship with the bank can now keep using the fund for life, even if they leave the bank’s employ.

Over the past few years the fund in general, and Parlevliet in particular, have won several official accolades within the industry. With top performance no-doubt helping the decision, Parlevliet was awarded the “CIO of the Year” in 2013, an award organised by La Trobe Financial and promoted by its energetic managing director, Greg O’Neill. Parlevliet says this was one of the highlights of his career and he congratulates La Trobe for its efforts in promoting best practice in investments.

Prior to that, the Group Super won the ‘rising star’ award at the annual Super Ratings Awards event in 2010, at which it also took out the top honours in each of the three diversified options. The following year, it took out the top award in those categories again.

Parlevliet says: “In addition to being proud of the value that has been created for Group Super members over my long tenure with the fund, I am also very proud of the excellent team within Group Super that has been built up over the years and in particular the customer focus demonstrated by the team. It is a great feeling to know that our members also appreciate our efforts through the excellent Net Promoter Scores that have been received.

“I am also proud of the fact that my investment team will be able to carry on our excellent work even after I head into retirement.

He says he has also enjoyed contributing more broadly to the superannuation industry through participation in various committees, such as the FEAL Advisory Committee and ASFA’s NSW State Executive and Economics and Investment Policy Council.

Parlevliet plans to continue his long-time involvement with competitive lawn bowls in retirement, seek a trustee or investment committee role within the industry, and enjoy more time with his family.

He says: “I am most grateful for the opportunities that have been provided to me over the 38 years by the Commonwealth Bank which has allowed an 18-year-old country boy from Dubbo to progress from “postage clerk” in the Dubbo (NSW) branch to a senior leadership position in one of Australia’s most important and meaningful industries.”