2018 NextGen

“Charles commenced with State Super in 2015 and is a leader within our team.  Charles is a talented, innovative and dedicated investment professional who has been instrumental in setting and exceeding our investment objectives.

State Super’s investment strategy must support our commitment to sustainable pensions and deliver lump sum benefits to our members well into the future.  Charles takes our responsibilities to members seriously and the member is always at the forefront of his thinking when executing investment strategies and decisions.

Charles brings a thoughtful approach to his leadership.  His dedication to drive innovative techniques in the investment discipline has added significant value to our asset allocation approach and our capabilities as a team.”

— Richard Hedley, Chief Investment Officer, State Super

As the general manager of asset allocation for State Super, Charles Wu considers the interactions of the whole of portfolio when formulating the investment strategy for State Super.  State Super is responsible for four defined benefit schemes on behalf of the NSW government. Wu’s focus is on setting the investment strategy for the long tail Defined Benefit assets of around $34 billion, while also focusing on delivering investment returns for the seven shorter duration options in the Defined Contributions funds of $8 billion. State Super has over $42 billion of assets in total, and over 100,000 members, with 65,000 in a lifetime pension. 

Wu notes his challenges of managing the $8 billion Defined Contribution portfolio with the requirements of strong investment returns for the options, and with significant liquidity requirements and a shorter duration than most funds. “We had to simultaneously run hard, but protect the downside,” he said.

When asked how he responded to this seemingly impossible challenge, Wu shared his approach: “We developed a short-term risk management model that would operate in an investment horizon of less than 12 months. This supported our decision process as to when to put on risk, and when we needed to increase our downside protection. In a way, running hard meant putting on more protection.”

Wu added, “However, protection is expensive, so we are conscious that each time we increase protection, we need a business case to justify this cost – either by running harder or avoiding some negative returns.”

Wu started his career in 2007 as an analyst for Mercer, and Everest financial groups and then truly cut his teeth at the $4 billion Media Super fund, where he was given a vast amount of flexibility to formulate investment strategy across multiple asset classes to increase the fund’s value. Wu has also been finding ways to use technology to condense months’ worth of work into minutes. Wu is vice president of the CFA Society of Sydney, driving an important agenda with a strong focus on ethics for the investment profession.

What are the accomplishments you are most happy to have achieved recently, and why?

A recent achievement for our business has been the development of a multiple internal asset allocation model using innovative techniques, such as machine learning. It has a tangible impact in supporting the decision making process for investment decisions.  Adopting new and evolving techniques improves our capabilities and ultimately adds value for our members.

What would you be most excited to accomplish in the year ahead, and why?

Over the next twelve months we will continue to enhance our asset allocation process.  I believe during the course of this year we will refine most aspects of the investment process. I’m excited to have the opportunity to spend more time on governance, process and other important topics that will add value to our organisation and the broader investment community.

What’s the most rewarding aspect of being an asset owner?

We understand the power of capital and importantly, the decisions behind using such capital.  A successful decision has the potential to impact a many number of people.  For instance, our ability to channel capital into infrastructure projects that support national growth and development or exercising our rights appropriately via proxy voting.  The reward of asset ownership can go far beyond simply the return on investment.

What’s the most challenging?

Investments is an incredibly challenging discipline. The fluid market conditions can be tricky with headline-grabbing geopolitical risks or the uncertainty associated with the economic cycle and picking the point of that cycle.  Additionally, stretched valuations across different markets can make it extremely difficult to allocate capital.

What are you most hopeful about in the future of the industry?

The increasing emphasis on governance and member values tells me we are heading in the right direction as an industry.  This is often reinforced through the discussions I have with many of my peers.

What are you most cautious about?

The flipside of the same coin. Unfortunately there remains examples where governance standards don’t meet appropriate levels.  It is critical for our industry to uphold governance frameworks that ensures good decision making processes with sufficient knowledge and due diligence.

As a leader, what are the most important aspects of the industry you hope to change over your career?

Trust.  I would like to see improved relationships and trust across the broader investment industry. Trust from an end investor is the dependency on a service provider in a situation of risk over a prolonged period. In 2017,  the CFA Institute conducted a global survey on the state of investor trust. While there was substantial improvement from the 2013 survey, there are still many investors who don’t trust finance services. This can only be improved by enhancing credibility and improving professionalism via ongoing education and training and doing the right things.

If you had one piece of advice for your peers, what would it be?

Maintain a consistent focus on doing the right thing by the members. 

What are the biggest current trends you are seeing that have surprised you?​

Within the asset owner environment, I’m surprised that new technologies such as big data and machine learning isn’t leading the agenda.  Embracing new technology has enormous potential for our industry.   As an asset owner, we are most blessed with data and the cutting edge is the capability to harvest information from such data.