Frontier Advisors will bring the State Super investment team in-house to provide independent CIO services to clients
Asset consultants Frontier Advisors will take over the entire State Super (SAS Trustees) investment team, led by Chief Investment Officer (CIO) Charles Wu, and bring them in-house to provide independent CIO (ICIO) services to its clients.
The service is different from both the traditional outsourced CIO services and implemented consulting services currently found in the market, Frontier said, as it is able to advice on a broader range of services and external products, rather than just in-house developed funds.
The ICIO service will support investors with their portfolio management, operational, risk management, administration, custody and reporting requirements.
Frontier argues this means it will retain its unconflicted adviser status.
Independent Advice
Frontier was one of the few asset consultants that hadn’t established a funds management arm alongside its advice business, in an effort to avoid any real or perceived conflicts of interest.
Frontier will continue this model and the ICIO team will be able to provide advice on a broad range of external investment solutions.
We want to provide investors with the benefit of retaining control over their own investment policy, strategy and portfolio construction, while accessing institutional-grade, end-to-end investment services. And to not have to give up our unconflicted advice model in the process – Andrew Polsen
“We want to provide investors with the benefit of retaining control over their own investment policy, strategy and portfolio construction, while accessing institutional-grade, end-to-end investment services. And to not have to give up our unconflicted advice model in the process,” Andrew Polson, Chief Executive Officer of Frontier, said.
As part of the agreement, State Super will become a co-owner of the asset consultant, alongside AustralianSuper, Hesta, First Super and Cbus. State Super will own 23.6 per cent of Frontier Advisors and will obtain a board position.
Agreement Sees Expansion of Frontier Sydney Office
The launch of the ICIO service is expected before the end of the calendar year and 14 State Super staffers will then join Frontier’s current Sydney-based team. However, the joined team will be based in State Super’s offices at 83 Clarence Steet.
No staff from either firm will be displaced by the venture, and it is anticipated that the current CIO role of Wu will expand to cater for future growth.
“The entire State Super investment team will exit State Super and move inside Frontier to offer investors the ability to put the asset consultant’s market-leading advice into action through whatever range of products they consider most suitable for their needs, via the execution capabilities of Frontier’s new in-house investment team,” Frontier said in a press release.
We Can Create Something Beautiful
State Super has been closed to new members since 1992 and, therefore, is technically in runoff, although the last members will not exit the fund for decades.
John Livanas, Chief Executive Officer of State Super, said the deal was partly reached to ensure the longevity of the investment team and secure their services for years to come.
“We have tremendously smart people and we need them because the problems are very hard. But when I look five years forward, then the funds are just going to shrink,” he says in a call with [i3] Insights.
We haven't outsourced our team; we have brought Frontier in with us. Frontier knows our business very well. I think we can create something beautiful here – John Livanas
To give the investment team the ability to grow the assets they manage and expand their services, this was an opportunity that benefitted both organisations. Frontier did not previously have the ability to implement their advice and had to use external parties for this, but with the arrival of the State Super team, they can now do this for smaller clients, such as charities and liability-driven investment organisations.
Livanas argues the fund hasn’t so much as lost a team, but rather gained a new capability.
“We haven’t outsourced our team; we have brought Frontier in with us. Frontier knows our business very well. I think we can create something beautiful here,” he says.
State Super has over 80,000 members and $38 billion in funds. It is understood that only the $7 billion defined contribution assets of State Super will transfer to Frontier Advisors, while the defined benefit component will continue to be managed by TCorp.
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[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.