Equities Roundtable: Capacity & Portfolio Construction
[i3] Australian Equities Roundtable: Capacity & Portfolio Construction | Investment Innovation Institute

Equities Roundtable: Capacity & Portfolio Construction

The Challenges of Growth

Within Australia, the rapid consolidation of superannuation funds has delivered scalability for larger funds. However, increasing size isn’t without capacity challenges.

While the size of superannuation funds may benefit them in unlisted markets such as direct infrastructure investments, it also increases the difficulty of implementing active investments into other asset classes.

Alpha in Australian Equities?

Australian equities comprise over 30% of super fund allocations, so burgeoning assets under management present an increasing capacity challenge. As funds face headwinds in sourcing alpha through traditional pathways such as lower liquidity and capacity exposures via highly active managers, they are increasingly evaluating the role of equity factors in their portfolio.

Today superannuation funds make up 1/3 of all money invested in the Australian sharemarket. Based on research from Northern Trust Asset Management, the anticipated growth of superannuation assets will require an additional $200bn in new capacity for Australian equities.

Beyond Active vs Passive

The need for funds to manage their growth will necessitate a change in the demarcation of traditional active and passive investment approaches. Increasingly active and passive investment approaches may no longer be considered as distinct and independent philosophies.

New investment solutions will sit on an active/passive spectrum where capacity and active returns will be jointly considered.

Funds will need to find investment solutions that can grow at scale and focus on return drivers that are independent of premiums for illiquidity and size.

In this investor roundtable co-hosted with Northern Trust Asset Management, we will address:

  • How funds think about their investment processes to consider capacity issues
  • Range of scenarios where funds should be considering capacity constraints
  • The configuration of equity investment strategies, including
    • Active/passive spectrum
    • Quantitative and factor investing
    • Large vs small caps
    • In-house vs outsource


Established in 2012, The Investment Innovation Institute [i3] launched its Educational Programs portfolio for Australian superannuation funds and insurance companies, with a focus on investment strategy and governance. In recent years, it has added programs for Asian investors, staging forums in China, Hong Kong and Singapore. A portfolio construction stream for pension and sovereign wealth funds in the Pacific island region was subsequently developed, hosted in Fiji and New Zealand.

In addition, [i3] runs asset class-specific forums for equities, alternatives, fixed income and real estate professionals. The [i3] Luncheon series, often featuring thought-provoking academic research, has proved to be immensely popular too.

In 2020 [i3] launched its Digital programs, complementing the in-person forums.