AustralianSuper has unveiled plans to build an internal management team in a bid  to further reduce costs.


The initial focus will be on creating a hybrid internal/external management model with the establishment of an internal management team for Australian equities which will commence trading mid next year.


Innes McKeand, AustralianSuper’s Head of Equities, said: “AustralianSuper has the scale and capability to move from a model of almost entirely external management to one of a hybrid between external and internal investment managers.


“Internal investing is an excellent opportunity for a fund our size to extract further value from the portfolio and global studies show that internal investment management typically costs three times less than external management for a similar return outcome.


“Internal investing will bring a number of significant benefits to the Fund with the target cost reduction at 10 basis points per annum over five to seven years with the savings from internal investment increasing as the Fund grows.


“Internal management will bring us closer to the market, give us greater control and increased capacity to access preferred asset classes,” Mr. McKeand said.


AustralianSuper is growing rapidly, with the current $46billion in funds under management expected to increase to $100bn by 2016 the result of employer and member contributions, market returns, and merger activity. In 2012/13 net cash flows, the AGEST merger and IBM transition will see the Fund grow by approximately $11bn.


AustralianSuper’s Head of Investment Operations, Peter Curtis, advised that the Fund is looking to add up to 20 investment staff in 2012/13.


“For the internal management team we will be recruiting around 14 people in a mix of roles including those directly involved in stock selection as well as ‘back office’ staff in operations, finance, legal. The other roles are part of the on-going strategy to add further expertise and capability to the key portfolios”, Mr. Curtis said.


Innes McKeand, Head of Equities at the Fund, will be responsible for the establishment and ongoing management of the internal Australian Equities team. Mr. McKeand joined AustralianSuper in September 2011 with over 25 years’ international experience leading/managing internal investment teams.