The building blocks of success: Q&A with NGS Super's CIO

I started my career studying building and had established my own construction company at the age of 22. I enjoyed the business and finance aspects associated with running my business and decided to, at the age of 25, study accounting and finance at University. At 26 I was lucky enough to get a role at MLC and left building to pursue my interest in finance. My first role was as a business analyst, however I quickly worked out that I enjoyed the investment aspects of the business. I had exposure to an industry fund through my years in construction and appreciated the different value proposition between a shareholder return business at MLC and the all profit to member business of an industry fund. The all profit to member value proposition sat well alongside my interest in investments so when an opportunity came up to work for NGS Super, it was a very easy decision to move.

NGS has grown rapidly over the last decade and its been fantastic being part of that growth. There are three key factors that have kept me at NGS Super:

1. Alignment of organisational values;
2. The constant challenge of working within the investment area;
3. Exposure to other great business leaders and investors including previous CIOs, asset consultants and various advisers we've engaged over the years.

"Just like reading a map, if you don't have a sign post for the risk you're taking, you may end up having unintended positions that could surprise you."

My short term goal is to complete the reorientation of the portfolio that we established with the Board and Investment Committee over 1½ years ago. We are largely through the bulk of this work, however there are still a few outcomes to achieve in the first half of this year. We also continue to seek out low correlated alternatives to diversify our dominant equity exposure.

My long term goal is to continue to improve both relative and absolute performance through a range of mechanisms including internalising more asset class and capital market research and reporting, and building holistic research platforms linked through a centralised database. We are also looking at ways we can enhance productivity across the team by adding specific expertise such as legal and risk management. These mechanisms should reduce overall costs, increase productivity and ultimately improve the investment decision making process.

Relative value between asset classes is becoming harder to establish given that most asset classes look expensive. We believe that we are in the later stage of a bull market and remain cautiously optimistic on growth assets over the next twelve months. From an equity perspective, we expect cross sectional volatility to increase which will be more positive for active stock selection, however volatility will lead to more corrections across the year. With global synchronised growth, we expect earnings yield on equities to continue to support a higher weighting to equities relative to bonds and prefer an overweight position to emerging markets relative to developed markets. Credit is less attractive given the tighter spreads, so a lower exposure is justified. Unlisted assets continue to be attractive provided that the valuations are reasonable, however its more difficult to acquire attractively priced assets in OECD countries. As a result, we believe that returns in developing markets are more attractive.

We are looking at alternative ways of gaining exposure to major thematic themes that we believe will shape the next decade and beyond. Some of these themes include, but are not limited to, increased demand for protein rich foods across developing economies - particularly Asia, ageing populations and the intersect between improvements in medical science and changes in work force participation, impacts of capital adequacy requirements within the banking sector and capacity to provide broad based financing, and income inequality resulting in more political popularism. We are looking at investment opportunities that have a link to these themes.

I've probably learnt more from the negative outcomes of our investment decisions. The list is long, however here are a few important items:

1.  If you don't understand the investment you're making and couldn't easily explain it to your members - then it's most likely a bad investment. 
   

2.  Treat back tested results with a high degree of scepticism. 
   

3.  Trying to time the market is futile and only through taking a longer term orientation will you be able to achieve persistent outperformance. 
   

4.  Make sure managers and staff incentive structures are aligned with your investment objectives. 
   

5.  Understanding the risks within a portfolio is very important. Just like reading a map, if you don't have a sign post for the risk you're taking, you may end up having unintended positions that could surprise you.
   

Invest your time in people with high degrees of integrity.

Compete in an Ironman triathlon and think about my next challenge.