Australia’s A$139 billion Future Fund is the latest sovereign institution looking to boost its technology capability, reshaping its investment team to strengthen technology and risk functions in particular.
Having been given an extension of its original mandate beyond 2020, the fund's management team is particularly conscious of the need to keep on top of the technology side. To that end, it is looking to hire a chief technology officer, whose role will tie in closely with the portfolio management team.
The realignment of roles at the Future Fund has resulted in the departure of chief investment strategist Stephen Gilmore, who has been with the fund since 2009.
Raphael Arndt will continue as chief investment officer, but will in addition take on responsibility for Gilmore's chief strategist functions, as well as leadership of the asset class teams.
Arndt has been CIO since September 2014. He was previously an investment director with Hastings Funds Management and held infrastructure policy positions in the private sector and the Victorian Department of Treasury and Finance.
A spokesperson for the Future Fund told AsianInvestor the simplifying of the portfolio management structure meant that the role Gilmore had no long exists. He will nonetheless stay on with the fund to the end of April to support the changes.
In due course the organisation will look to fill a new role of head of portfolio strategy.
Other changes in responsibility at the Melbourne-based fund include Wendy Norris, currently head of infrastructure & timberland, taking up a new and expanded role as of deputy chief investment officer, private markets.
Norris joined the Future Fund in 2010. Prior to that she was an investment director at Hastings Funds Management in New York, San Antonio and Melbourne. She previously held project finance roles with ABN Amro in Chicago and Sydney. Barry Brakey, head of property, and Steve Byrom, head of private equity, will report to Norris.
David George, head of debt & alternatives, will take up the new role of deputy chief investment officer, public markets. In this role he will oversee listed equity, overlays and debt & alternatives. George joined the Future Fund in 2008. Previously he was a principal at Mercer Investment Consulting in Sydney.
Björn Kvanskog, head of listed equity, Tanya Branwhite, head of market insights and portfolio implications and Hugh Murray, head of overlays, will report to George.
The Future Fund's business model, investment process and investment strategy will not change, although the fund can taken a slightly longer term view given that the government has said it will not begin drawing down on the fund in 2020 as originally planned. The federal budget in May 2017 extended the life of the fund until 2026.
The new position of chief technology officer will involve leadership of the existing IT area, as well as investment solutions, an existing team which will continue to work closely with the investment team to develop bespoke investment technology solutions to drive investment insights. A global search process for this role will commence shortly, said the fund.
In the March edition of AsianInvestor magazine, Peter Costello spoke about how the Future Fund board has spent a lot of time on cyber attack and cybersecurity discussions. “No matter how sophisticated you are at dealing with them, the offensive attacks are becoming even more sophisticated all the time. Of all the risks that could affect our portfolio, I would put this in the top three. It is something you have to work on continuously.”
Other sophisticated institutional investors are also increasing their focus and spend on technology. Singapore's GIC hired Wu Choy Peng to the newly created role of chief technology officer last August. She will provide integrated oversight for technology and data analytics, said the sovereign wealth fund in a statement at the time.
The Future Fund's management is also keen to ensure the fund has a robust process for identifying risks and extracting insights from the risk monitoring and risk management processes. To this end, general counsel Cameron Price will add the role of chief risk officer to his responsibilities.
Price has been the Future Fund's general counsel since 2014. He was previously a partner and board member at law firm Allens Linklaters, with particular expertise in mergers and acquisitions, private equity, equity capital markets and corporate governance.
Chief executive David Neal said the various changes were needed to secure the fund over the next 10 years and beyond that. "This will strengthen our collaborative approach and help us to be more streamlined in the hunt for investment opportunities, the management of the investment portfolio and the creation and use of technology and risk insights."
At the fund's most recent briefing, chairman Peter Costello explained the extension of the mandate “gives the fund almost another decade and we think we can extract an illiquidity premium that we wouldn’t have been able to if the drawdowns were going to begin in 2020.”
With this greater investment freedom, Neal emphasised that the investment team continues to look at opportunities in private markets, particularly in infrastructure and emerging markets. "But it’s quite hard to get meaningful capital [invested] with good quality managers. It takes a lot of time and effort,” he said.
The Future Fund's 10-year return of 8.1% per annum exceeds the benchmark target of 6.8%. From seed capital of $60.5 billion in 2006, the fund has now earned an additional $78 billion.