Craig Roodt is Director of Investment Governance and Risk at Deloitte Touche Tohmatsu and is also well known for his time with the Australian Prudential Regulation Authority (APRA). In this episode, we speak about the governance challenges of in-sourcing asset management functions by pension funds, the Your Future, Your Super performance test and some the worst governance failures he has seen during his time with the regulator.
Overview of Podcast with Craig Roodt:
01:00 Governance pitfalls in internalisation
05:00 How to set a proper framework and determine what success looks like?
08:50 Does the leadership team have the latitude to actually deliver on the strategy?
09:30 When things go wrong you actually need to understand why, not just that it is below the index. That is just the outcome.
12:00 What are good reasons to in-source?
15:30 Boards always have to look at their level of skill as the environment changes
20:00 Independent directors are not a barrier to having the right skill level of boards, but it is also not a solution
23:00 Risk management is not about explaining what went wrong after the fact. It is about recognising warning signs.
25:30 YFYS has created a regulatory risk, a different objective that funds have to manage to
29:00 You can invest fully in cash and pass the test. That illustrates that there are problems with the framework
30:30 For most of the 2010s, we’ve had a risk-on environment. What that meant was that if you took less risk in any asset class, you were going to underperform.
31:30 The performance test doesn’t look into the why.
32:30 As a means to identify which funds have been lagging, the test works, but you need to ask why. Potential fixes to the test
35:30 Outperformance should also be investigated
36:30 What were some of the worst governance failures that you have seen when you were at APRA?
40:00 Some of the things I saw were, if it wasn’t actually people’s money, it would have been funny.
42:30 Governance is not akin to solving a mathematical problem.
45:00 What is your focus at Deloitte today?
50:00 Greenwashing and materiality tests
__________
[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. The [i3] podcast is available on iTunes, Google Podcast, Spotify, Amazon Music, Stitcher or your favourite podcast platform.