The superannuation powerhouses are reshaping their investment teams as they grapple with the complexity that comes with massive growth.
Australian Retirement Trust investment chief Ian Patrick says growth has a knock-on effect on the size and composition of internal teams.
Patrick said the more a fund insources, the more the team is likely to expand in size, and the more firsthand investors and other related investment professionals will likely be added to the team.
"Larger funds are likely to have a bigger range of opportunities, which requires a broader set of skills to both research and due diligence opportunities and managers, who provide the requisite expertise for a hybrid model like ART," he adds.
"The breadth of activity will increase as the fund expands and as we pursue additional opportunities to diversify the sources of return or risk mitigation for our portfolio."
He flags tackling climate change and pushing ahead with energy transition as being a particular struggle, noting the trillions of dollars flowing into that sector.
"The skillsets in renewable energy development and electricity transmission are a fair way along a maturity curve, but in contrast, the investor skillsets to evaluate opportunities around technological developments in hard-to-abate sectors or nature-based carbon capture are more nascent, certainly within asset owners."
As CIO, Patrick goes on to say, you employ the specialists to provide the best advice and wrap around that good governance processes.
For example, themes like the energy transition will require significantly more expertise and demand new skills.
In his view, understanding the transition pathways for different industries and being able to rationalise those dynamically is a key example.
Also, staffers are becoming more quantitative to support the team's qualitative decision-making.
Patrick says data is increasingly playing an important part of the equation in terms of informing and enabling higher quality research and decision making and so going forward, the skills and capabilities around data and interpretation will form part of investment teams.
Yet surely adding more specialist capabilities into the mix increases complexity - ultimately making portfolio design and construction way harder - especially at the total portfolio management level.
And because basically, the larger the investor, the more and more granular the analysis becomes, and the more work is required to integrate all the different views.
But Patrick doesn't think dropping more specialist capabilities into the mix will make his job harder.
Nor does he believe that taking more granular views by focusing on more sub-asset classes makes portfolio design and construction gruelling.
He remains sanguine, saying diverse sources of thought contribute to making sense of intricacy when making investment decisions.
"What matters is for the CIOs to understand the principal drivers and risks inherent in the areas of investment that the team is undertaking and understand how those come together in the portfolio and the best approach to portfolio construction," he states.
"I am still a believer that in aggregate there are some primary return drivers and primary risks around which groups of assets can be characterised and the composition of a portfolio of assets around those primary drivers and inherent risks.
"As for infrastructure real estate or credit, those asset classes are run by specialist teams with an overarching desired series of characteristics specified by the strategy team, and if that's done well and governed well, I believe the complexity that is inherent at the individual asset level can be suitably assimilated into a whole of portfolio view."
Patrick concedes growth and complexity definitely change the extent of activity and breadth of issues encountered.
However, in parallel (or otherwise it wouldn't be manageable), the capabilities, breadth and governance sophistication of the team/organisation increases to complete the role of CIO.
"The CIO becomes more of a steward of a capability than the core capability itself."
Central to everything is having the right culture.
"In uncertain times, it is crucially important there is an openness and comfort with constructive challenge.
"Bringing the best of the collective knowledge as a team to improve the retirement incomes of our members is what really matters."
As for how Patrick recognises team success, it has a lot to do with team building and deepening people's understanding of their preferences and capabilities.
Doing good for society or purpose-driven work is at the top of his list - guarding and growing the retirement savings of 2.2 million Australians.
A supportive team environment where constructive challenge is welcomed comes a close second, followed by opportunities for professional development and growth.
Finally, working alongside a highly skilled and capable investment team is key.
Ultimately, he says, it is a combination of accountability and knowledge that collective contributions are best when openly tested and transparently explored.
Fools and charlatans
Steering funds through the stormiest of investment markets was the theme at the recent opening of ART's Sydney office.
War and international tensions have intensified the wild ride investors have experienced because of unstable markets due to inflation, central bank actions and global recession.
And geopolitics will continue to roil the investment landscape for investors, Parker warns.
The economist called the geopolitical environment fraught and said it is hard to imagine it will improve.
But the economist warned that funds can't predict geopolitical events - can't build portfolios based on how they see the world evolving geopolitically.
"Superannuation is the longest-term investment pretty much any of us will ever have," Parker says.
"Because of that, we can't design portfolios based on our ability or anybody else's ability to forecast what will happen in the economy or the stock market over the next three, six or twelve months.
"Anyone who thinks they can have my best wishes, but frankly, anyone who claims they on a reliable regular basis with other peoples' money in my view as either a fool or a charlatan or both."
Parker says while recessions and market downturns are impossible to predict in advance in any reliable way, they are inevitable and that investors will likely see five or six different recessions and as many market downturns over their lifetime.
"Yet every recession, every downturn, every bear market, every crisis comes to an end."
"At the end of the day, as long as life, the economy, and business go on, superannuation funds will continue to earn dividends, rent and interest and pass that on to our members to fund a good retirement."