Frontier, together with long-term client STC, the trustee of State Super, a superannuation fund for NSW government employees, are excited to announce a bold plan to offer an unconflicted, end-to-end advice and execution investment service.
The collaboration will deliver a new and innovative way to meet the demand from a growing cohort of asset owners seeking a portfolio management service built on institutional grade investment advice free from product conflicts.
State Super, which was closed to new members in 1992, continues to serve the needs of over 80,000 members and their $38 billion of funds. However, with around three quarters of members having progressed into retirement, the closed fund is not facing the future growth prospects of other large super funds. What State Super does have however, is a strong internal investment team and capability, albeit managing a portfolio facing a gradual decline in size.
Currently we are the only major asset consulting firm operating in Australia that has not entered into the realm of offering its own investment products alongside providing advice on how to invest funds. Our owners, four industry superannuation funds, are steadfast on the commitment to ensuring an unconflicted source of advice is available for institutional asset owners to use.
We have identified there are growing number of organisations reaching a level of asset ownership that requires an institutional grade level of advice over their portfolios.
In the face of industry and regulatory change, many are grappling with increasing operational complexity, particularly due to ESG risks, compliance obligations, higher private market allocations and in particular, changes in the custody market. Without the internal resources to manage these challenges and risks, most organisations have been forced to outsource the management of their funds, typically to advisers who are also offering the end investment solution. An inherent conflict and potential drag on performance.
In an industry first, the entire State Super investment team will exit State Super and move inside Frontier to offer investors the ability to put our market leading advice into action through whatever range of products they consider most suitable for their needs, via the execution capabilities of our new in-house investment team.
The offering is being labelled as an independent chief investment officer, or “ICIO” service, distinct from both the traditional OCIO or “outsourced chief investment officer” arrangement and implemented consulting services currently found in the market. Frontier’s ICIO service will support investors with their portfolio management, operational, risk management, administration, custody and reporting requirements, while retaining our unconflicted adviser status.
Our CEO, Andrew Polson, is excited about how the expanded offering can shake-up the market for advice to small and medium-sized asset owners.
“For a long time, we have had many investors tell us they want to access the same standard of advice we offer some of the country’s largest asset owners and not have the compromise that comes with an adviser who also provides the product solutions. However, these investors typically lack the internal resources to be able to put our advice into action without outsourcing a range of functions required to manage their portfolio and often giving up that independence.
“Now, with the inclusion of an internal investment team within Frontier, we think we’ve cracked that problem for the market”, said Andrew.
“We want to provide investors with the benefit of retaining control over their own investment policy, strategy and portfolio construction while accessing institutional grade end-to-end investment services. And to not have to give up our unconflicted advice model in the process”
We advise some of Australia’s largest superannuation funds including AustralianSuper, Cbus, Hesta, Telstra Super, Vision Super, the Western Australian government fund GESB, and State Super itself, who will become the first client of the new ICIO offering. We work with clients in every state and territory around Australia, and some offshore, and have famously and staunchly resisted the conflicts inherent with combining investment products and advice, in favour of our belief in the importance of unconflicted, client centric, advice.
The major development will see State Super effectively lift their investment team into Frontier. State Super CEO John Livanas sees this as a win-win for the Fund, their members and the team itself.
“We have a great team of professionals managing the investment of our portfolio and they’ve worked closely with Frontier for many years now. For State Super, it will be a seamless transition as both the current adviser and investors will remain operating exactly as they have for over a decade. And, we can secure this proven capability for State Super and our members into the future”, said Mr Livanas.
“For the team itself, this move opens up professional opportunities, in both the near and longer term, as they move into a much larger investment organisation with a strong growth trajectory.”
Having been a client since 2006, STC will now be admitted as an owner of Frontier alongside AustralianSuper, Hesta, First Super and Cbus – a further plus for State Super members. The inclusion of the new capability boosts the future prospects and the valuation of Frontier resulting in both a lift in value for current owners and a new asset for the State Super portfolio.
Our Chair, Angela Emslie, sees the move as an important step in the long history of both organisations.
“The Boards of both State Super and Frontier, have been diligent in exploring the analysis, market testing and recommendations put to us by management and independent external advisers. Although we have been patient and curious in that process, it was apparent early on that this was a unique and positive opportunity for all stakeholders”, said Ms Emslie.
We have been working closely with State Super to shape the new initiative for over eighteen months and with formal sign off now in place from the Board’s of all Frontier’s owners, and State Super as a new entity on the Board, planning for a launch of the ICIO service is expected before the end of the calendar year. At that time 14 staff will move from State Super to join Frontier’s current Sydney based team giving us a larger physical presence in Sydney and a total team numbering in excess of one hundred staff.
The nature of the roles of the transferring staff mean there will be no cross over or duplication of roles in the new entity, but rather a complementary extension of capabilities and experience. No staff from either firm will be displaced by the venture and it is expected that take up of the ICIO service will ultimately see Frontier continue to expand its team to accommodate the forecast growth.
