Once AustralianSuper has obtained the required licence to set up a rep office in Beijing, the Melbourne-based retirement fund will be hiring research staff to support Stephen Joske, who joined as senior manager for Asia last month.
The institution’s exposure to China is expected to grow very quickly, he tells AsianInvestor, given that the country’s economy is set to double in size in the next decade. And AustralianSuper’s $42 billion in AUM is likely to double even faster than that, especially given that employee contributions to super funds are set to rise to 12% by 2020, from 9% currently.
It may well apply for a qualified foreign institutional investor licence, although given the size of the fund's portfolio, the few hundred million dollars of exposure a QFII quota may allow would only be a small part of the allocation it wants to make to the country.
Although the fund is at the strategic planning stage in Asia, the next most obvious choice for an office would be Hong Kong, with Mumbai and Singapore also potential future destinations, says Joske.
His role is a dual one covering macroeconomic research on China and helping develop AustralianSuper's Asia expansion strategy. Joske is the institution's first investment executive outside Australia and Beijing is its first overseas office.
“Australian investors naturally have a lot of exposure to China [through their commodity stock allocations],” he says, “but you can’t sit back and rely on that for your China exposure. China is a maturing economy, and those linkages will change over time, so you may need to change strategy to allow for that.”
The fund uses external asset managers for the bulk of its portfolio management, both in Australia and outside, but expects to do more investment in-house as time goes by.
“We need to decide on the balance of in-house versus external managers,” says Joske, who admits that AustralianSuper’s amount of outsourced investment is likely to continue to rise, as it allocates more overseas. This is in line with its plans to have research staff but not portfolio managers on the ground in Asia, for the time being at least.
Asked whether AustralianSuper uses or will use domestic China asset managers, Joske says: “We are always on the lookout for good managers and being on the ground will allow us to look at them here more closely.”
Mandarin-speaking Joske was previously director of the China forecasting unit for the Economist Intelligence Unit, where he managed economists and econometricians to provide advice on factors driving structural change in the Chinese economy. He has also worked at the Australian embassy in Beijing, among other places.