2020 will always be remembered as the year of COVID-19, devastating entire sectors of the economy, from hospitality to airlines.
But looking at the most popular topics of the year, it is clear that the pandemic wasn’t the only thing on investors’ minds. Internalisation, Chinese A shares and dynamic asset allocation were among the most popular topics of 2020.
In the top five of most-read articles, we find at first place an interview with Brett Chatfield, Deputy Chief Investment Officer of Cbus, where we discussed the continuing evolution of the fund’s internalisation process.
And as the regulator continues to push for further consolidation of the superannuation industry, leading to more funds gaining sufficient size to contemplate in-house management, the topic of internalisation is likely to remain in the spotlight for some years to come.
In second place, we find an article on AustralianSuper’s journey to implement a dedicated China mandate. It is no surprise that China A-shares have garnered so much interest. In 2019, MSCI increased the inclusion ratio of China A shares in the MSCI Emerging Markets Index from five per cent to 20 per cent and, in fact, China A shares has been the driving force of any emerging market portfolio.
Australian investors have historically been hesitant to award single-country mandates, but at 20 per cent of the EM sector, mainland Chinese equities are hard to ignore. AustralianSuper is one of the more recent pension funds to implement a dedicated China exposure, while Aware Super and VFMC have had mandates in place for some time. Mine Super is now preparing a dedicated mandate too.
In third place, we find New Zealand Super, which made it in the top five with two articles. This one is about the fund’s strategic tilting program, a form of dynamic asset allocation. Dynamic asset allocation is sometimes dismissed as market timing or simply as too hard to do consistently well, a sentiment that was perhaps reflected in Willis Towers Watson’s assessment of New Zealand Super’s investment strategy, when it asked the board to confirm whether they were still comfortable with the risk budget assigned to this methodology.
Top 5 Most Read Articles of 2020
- Cbus Reaches Scale with Internalisation
- AustralianSuper on China A Shares Search
- NZ Super Stands By Strategic Tilting
- Pricing Climate Change at NZ Super
- Managing the Cycle with VFMC
But with a track record like New Zealand Super, it is easy to see why the board was happy to confirm their support. The fund’s tilts have consistently added value since the inception of the program.
David Iverson, who led the strategic tilting program at NZ Super, has since left to join the New Zealand’s Accident Compensation Corporation (ACC), where he has been appointed as Head of Dynamic Asset Allocation for its NZ$46 billion portfolio.
New Zealand Super returns in the top 5 with another interview discussing the fund’s efforts to distill the challenges posed by climate change into quantifiable data that can be used in equity valuations.
It is interesting to note that while the global financial crisis relegated climate change to the domain of less pressing issues on the agenda, it remained firmly front of mind for most investors during the coronavirus pandemic.
Finally, we find an interview with VFMC Chief Investment Officer Russell Clarke in the top five. VFMC doesn’t often grant interviews, so this was a special treat. And Clarke didn’t disappoint. He revealed the implementation of a new program which tries to address regime shifts with meaningful asset allocation shifts.
The new cycle-aware asset allocation program takes much larger tilts than any dynamic asset allocation program would, but only when there are relatively clear signs that the market is about to turn over an extended period of time.
In case you’ve missed any of these articles, they remain freely available on our website.
Thank you for reading our newsletter and we hope you will have a relaxing holiday season.
See you again in 2021!
[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.