After several years of insourcing big parts of their investment portfolios it is now clear that the process can add value for super funds, according to Damian Moloney, the chief executive of Frontier Advisors.
Commenting on the recent news that the US$35 billion Harvard Endowment was to outsource most of its investments, making redundant more than 100 internal investment positions, Moloney said that the big Australian super funds which had gone done the insourcing path had done so very carefully.
“Because they were careful about how they did it they prevented a lot of angst that could have happened,” he said. “The trend is clear and it’s clear that there’s value to be added from it. Hopefully we will get to see more validation of this.”
Moloney said that while some funds had backed out of certain segments of insourced management, there had not been a “complete reversal” as has happened at Harvard.
The insourcing trend, though, has not been good for the major asset consulting firms, such as Frontier, with very large funds now doing some of the work formerly performed by their consultants.
In response, Frontier has broadened the scope of its advice, particularly on strategic matters. It also developed an online research platform which is available to existing consulting clients as well as new clients. There are so far two big users of the ‘Partners Platform’ which don’t use Frontier’s other retainer-based services, two more in contract stage and several which are trialling the service.
The Platform was launched in 2014 after about five years of development work. Frontier says it believes the technology to be “disruptive” in how it delivers investment consulting capabilities.
“It shapes the new business model of knowledge sharing and collaborative consulting where client and advisor work together, or in some cases where the client completes their own work, especially where expanding internal investment teams now possess the skills to do so.”
The platform is made up of a series of systems and modules. ‘Mercury’ is a fund manager research database containing all of Frontier’s intelligence on thousands of institutional grade investment products and managers. Subscribers can access ratings, notes, updates and Frontier’s own research at the click of a button whenever and wherever they want, and can also elect for selected research to be “pushed” through to them as it is uploaded.
With internal teams growing, and more research being undertaken in-house, Mercury also includes a range of self-management tools to store mandate information, internal manager notes and watch lists, and even comprehensive compliance solutions to help meet the reporting requirements for both APRA SRF 702 and ASIC’s RG 97.
Alongside Mercury sits ‘Prism’, the Platform’s portfolio analytics system. Users can use Frontier’s own proprietary models to perform asset allocation, risk, liquidity, peer comparison and even climate change forecasting and analysis.