There is an increasing pressure on Australian super funds to ensure their operating models are fit-for-purpose in a rapidly changing retirement fund landscape.

There is an increasing pressure on Australian super funds to ensure their operating models are fit-for-purpose in a rapidly changing retirement fund landscape.

Peter Sherriff
Peter Sherriff

Director of Product Strategy, Asia Pacific, Charles River

Peter Sherriff Peter Sherriff

Director of Product Strategy, Asia Pacific, Charles River

Australia’s superannuation funds are rethinking their operating models to adapt to  significant market changes, a spate of fund mergers, far-reaching regulations, rising expectations of fund members, technological developments and innovative outsourcing trends.

Recently, at the Investment Operations Forum, hosted by the Australian Institute of Superannuation Trustees, industry leaders discussed the challenges and opportunities facing funds and how the rapidly evolving operational environment is affecting funds and requiring them to improve efficiency and change how they operate.


View From the Top: Leaders of Operations

The morning session started by addressing the issue of what chief operating officers (COOs) and other operational leaders of “super funds” should be doing to meet their funds’ current and future needs. Recent developments in financial markets, fluctuations in asset values, fund mergers and acquisitions (M&A), changing fund member demands and new regulations are forcing funds to re-evaluate and update their operating models to move with the times.

The panel acknowledged the symbiotic relationship between operations and the front office and one area of focus for COOs and their teams is to establish strategic partnerships with custodians, data providers and other third-party suppliers. Such relationships are essential for ensuring efficiency and value creation for members who want their pension to see them safely through retirement. Strategic partnerships require a breadth and depth that extends beyond simple data integration, and should provide business value through fit-for-purpose turnkey solutions.


The Evolution of Operating Models

Regulatory and stakeholder demands continue to drive superannuation funds to evaluate their operating models, find new areas to improve efficiency and reap the benefits of scale as and when consolidation ensues.  Funds expressed they are navigating these challenges with different impacts and outlined these during several sessions at the event.

Smaller superannuation funds are focused on setting the foundations for growth – with a core framework and operating model capable of capturing data from external partners and advisors to help meet their investment management, asset servicing and regulatory reporting requirements.

At the larger end of the spectrum, some of the biggest funds further down the path to internalisation of their investment management, are going international and are focused on setting up their technology and infrastructure for long term success. However, as they grow in size, and diversify into new asset classes and countries, they are challenged by bringing multiple organisations together from a cultural perspective. Managing integration activity is disruptive, and it requires significant work to bring products and platforms together whilst managing business as usual. This further emphasises the importance of digitisation and its foundational role in reducing friction. Firms should work towards using technology as the enabler to commingle various data sets from their relevant sources without the operational overhead of traditional ETL/ELT processes.

Throughout the integration process, funds acknowledged the importance of retaining an identity and point of differentiation as they moved forward with their people at the centre of that strategy. Investing in people is key to the transition and bringing various teams together.


Maximising Efficiencies Through Technology and Data

The quantity, quality and timeliness of data used by investment teams varies across funds. At the smallest and simplest end of the spectrum, there is widespread dependence on spreadsheets fed directly by data from external service providers.

At the other end of the spectrum, large and sophisticated funds have their own robust data management solutions and investment platforms with integrated risk and performance attribution capabilities. However, they are likely to be supplemented by external data vendors.

For all funds, the key to better operating models is to gather timely and accurate data on exposures and positions across internal and external investment managers, and public and private assets. A unified data management platform enables faster and better-informed risk and allocation decisions, as it reduces the information time lag affecting firms that rely on external data providers.

Improving operational efficiency is highly dependent on emerging technologies. This is where State Street Alpha℠ comes into play – a front-to-back asset servicing cloud-based platform, which combines State Street’s middle and back office capabilities with the Charles River Investment Management Solution (Charles River IMS).

Our platform streamlines the entire investment lifecycle across all asset classes, from portfolio and risk management through to trading and post-trade settlement, with integrated compliance and managed data throughout.

As an essential partner with decades of experience and market expertise, we help our clients streamline their processes, create operational efficiency and allow them to focus on their growth.


You can learn more about this topic in our recent whitepaper on The Evolution of Superannuation Operating Models or by direct outreach.


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