Getting Technical

Faced with exponential growth, Dr. Raphael Arndt, CIO of the Future Fund of Australia, is changing the way he manages his staff, technologies, and the fund’s money. He’s added a chief technology officer function and a few new roles, but has purposely kept teams small and nimble.

CIO: Now that your fund is 11 years old and transitioning from a small to a mid-sized business with 190 employees, how are you changing things operationally?

Arndt: The Future Fund is maturing, and in doing so is investing in systems and technology to support us as we grow. Having started with A$60.5bn in 2006, we now manage A$180bn [US $127 billion] across multiple funds— and we are maturing as an organisation to support growth in funds under our management.

As CIO, I am ultimately responsible for our investment process, standards, and our portfolio.

In addition, my role involves activities outside of pure investment, including: setting the vision and direction for the investment team, working on things like resourcing, succession planning, team development, and prioritisation of our activity, as well as thinking about the future and what we need as an organisation in terms of systems and technology to manage the portfolio going forward.

The government made a decision last year to defer drawdowns from the Future Fund, which mean that the funds we manage will be significantly larger in the years ahead than what we had been planning for.

Reflecting this, we announced an organisational restructure in March this year to ensure as an organisation we are set up for the future.

Some of these changes entailed:

• The creation of a new chief technology officer role; and
• Bringing together our “top down” and “bottom up” investment teams reporting to me, to help facilitate our joined-up investment process.

CIO: What does this mean for your team?

Arndt: In seeking to ensure I best use my time, earlier this year I promoted two of our senior investors into deputy CIO roles—David George in Public Markets and Wendy Norris in Private Markets—to help me take our investment team forward with a structure fit for purpose as we grow.

CIO: Are you using technology differently (and how?)?

Arndt: We are investing in systems and technology to give us faster and better portfolio insights, more stability, and more efficiency, so repeatable reports are less labour intensive to produce.

And we are investing in systems to make us better investors in giving us the tools to effectively deliver our one portfolio approach—namely, so we can look through all our aggregate investments across all sectors to understand underlying exposures to ensure we own the portfolio we want to own. For instance, this helps ensure we aren’t inadvertently over-diversified by having multiple positions offsetting each other at a total portfolio level, or alternatively helps ensure we aren’t unwittingly overexposed to a particular factor in aggregate across multiple different positions.

CIO: You’ve created smaller teams to stay nimble. Can you give us an example?

Arndt: Our approach is to remain relatively small as an investment team, and we haven’t built large internal teams. We want the flexibility to move the portfolio as market conditions change and have a belief that smaller internal teams, and effective interaction between our bottom-up and top-down investors, is the best way to facilitate this approach to enable portfolio flexibility over time.

Furthermore, we incentivise our investors on the performance of the total portfolio. This is to avoid specialists only focusing on managing their part of the portfolio against a sub-sector benchmark. Instead, we want all our investors to think like part owners of the total portfolio, always thinking about how prospective returns in their area of specialisation compare with other sectors, and seeking to size opportunities for the total portfolio, and being prepared to make the right long-term investments for the portfolio.