Profile: David Hartley

SunSuper CIO David Hartley

06-Nov-2014

By James Brooks

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When aiming to fully realise their retirement goals, Sunsuper chief investment officer David Hartley believes investors need to remain calm and use the full range of investment products available in the market to deal with today’s increasingly volatile environment.

“In seeking to achieve investment objectives, it is important to consider the full opportunity set that is available, so both listed and unlisted assets need to be considered in order to provide a robust and diversified portfolio,” Hartley says.

“Diversification, particularly into unlisted assets, is critical and is an important part of our ongoing investment strategies.

“Having said this, we hold exposure in listed markets pending the identification of good opportunities in unlisted markets as it is also important not to diversify into assets that are not expected to provide good returns.”

And, as such, since taking over as CIO at Sunsuper in 2005, Hartley has introduced a purpose-driven approach to investing that focuses on why members’ money is being invested using a selection of handpicked fund managers to provide access to a wider range of asset classes.

A 25-year veteran of the Australian and international markets, the actuarial studies graduate from Macquarie University and senior fellow of Finsia has had success as both a fund manager and investment consultant, including senior roles at Russell Investment Group, Mercer Investment Consulting and UBS Global Asset Management.

Reflecting on his decision to join Sunsuper, he says he was attracted by the fund’s strong profit-for-members philosophy and lack of compromise in pursuing the best investment returns for members.

Indeed, with the potential of increased volatility ahead, he says he believes his time in the markets has taught him many valuable lessons and served to enhance his skills as an investment manager.

“The only time you need concern yourself with the price of an asset is if you are buying or selling – the rest of the time it’s simply an opportunity,” he says.

“There’s always another potential deal and, when selling, always be aware of the future return that is being given up.

“Market volatility can give you the chance to pick up good assets at cheap prices – treasures can often be found amongst the debris discarded by panic sellers.”

Nevertheless, with all these lessons taken into consideration, he maintains that, irrespective of the market sentiment, the fundamental requirement for investors will always remain the same: don’t panic.

“These observations have led us to diversify our portfolios and also to rebalance portfolios so that we can deliver members a more even pattern of returns,” he says.

“By doing so, our goal is to assist our members to maintain their strategies in the face of stresses that are created and occasionally accentuated by emotive reporting of moves in investment markets.

“Sunsuper is calm in the face of market volatility – this can sometimes be disconcerting to those who are more inclined to panic.”

And the approach seems to be working, as today Sunsuper has around $30 billion in assets under management on behalf of 1.1 million members, and consistently finishes above the industry performance median in the one-year through to 10-year periods and more recently featured in the top quartile of last year’s SuperRatings survey.

But, unlike many of his peers, Hartley still sees Sunsuper’s preferred manager-of-managers approach, with its relatively small team of 20 investment professionals, including new recruits Alistair Sloan and Greg Barnes, remaining viable versus taking more responsibility in-house.

“Many of Sunsuper’s investment team have been successful at in-house management and Sunsuper has been getting more and more closely involved in the management of assets and, in particular, the unlisted assets for which we include direct holdings and co-investments,” he says.

“However, setting up a fully internal in-house investment function at this stage, if done with a proper degree of diligence, would incur additional expense, reduce the flow of investment insights and expose Sunsuper’s members to greater risks.

“For example, if Sunsuper were to move to manage listed shares in-house, then we would need to set up trading systems, which would cost money.

“There would be little point in insourcing passive management, which can be sourced cheaply externally, so the implication is that we would need to employ active management.

“The active management would go through periods during which it underperforms and the fund would need to be able to cope with that, as the pressure would emerge to bail out when underperformance is at its greatest.

“If the team is very successful then it will be challenging to maintain the team, as the fund would become a training ground, such as was the case seen at GIO, where I worked in the 1980s, and other institutions in times gone past.

“So the internal investment function would tend to gravitate towards sustainable mediocrity, which is not an attractive outcome.”

Recent star performers among Sunsuper’s team of outsourced managers include Vinva, Balanced Equity Management and Maple-Brown Abbott in Australian shares, Tweedy Browne and Baillie Gifford in developed markets/international shares, Brandes in emerging markets, Morgan Stanley Investment Management and Trust Company of the West in fixed income and AMP Capital in property/retail shopping centres.

Summing up his philosophy towards outsourcing investment management, Hartley notes: “It is better to seek uncompromised excellence as the explicit aim of appointing external managers is to seek excellence, in the knowledge that best practice is something that is continually evolving.”

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