137: Aware Super's Simon Warner – Investment Strategy as a Perspex Box, TPA and the Changing Role of CIO
In this episode of the I3 Podcast, Aware Super CIO Simon Warner joins us to discuss how his unusually broad background across fixed income, equities, public and private markets shapes his approach to investing. Simon explains the realities of implementing a total portfolio approach within Australia's DC superannuation system, balancing risk, liquidity and cost while empowering specialist teams rather than imposing top‑down macro calls. He also talks about Aware Super's evolving organisational structure, its global expansion via London, and the changing role of CIO in today's superannuation industry. Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights Overview of podcast with Simon Warner, CIO of Aware Super [02:00] Simon's career path: Simon outlines his journey from JP Morgan balance sheet risk management (rates and FX) to AMP Capital and then to Aware Super, spanning fixed income, equities, multi‑asset, and private markets. [04:36] From trader to investor: He reflects on moving from being a trader in highly liquid markets to a broader investor, stressing how this built a rigorous risk‑management ethos that underpins his work today. [05:50] Total Portfolio Approach (TPA) in super: Discussion of TPA and why implementing it is different for Australian super funds (with member choice and labels) compared to sovereign funds like the Future Fund or NZ Super. [06:55] Constraints of the Australian super system: Simon explains key constraints: DC structure, direct B2C member relationship, liquidity for switching/redemptions, and dual focus on net returns and costs in a competitive market. [09:30] "I sometimes wonder whether commentary on TPA isn't code for top-down decision-making?" [10:33] Practical TPA and risk premia vs idiosyncratic risk: He describes building a common language and philosophy around risk premia vs idiosyncratic risk, using infrastructure as an example to think about embedded factor exposures across the whole portfolio. [15:33] Active vs passive and future of data in private markets: Simon talks about using analytical frameworks to separate what should be cheap beta/factor exposure from what is truly idiosyncratic alpha worth paying for, and how better data in private markets will enable more scientific portfolio construction. [17:14] Restructuring the investment team: He explains recent organisational changes: grouping property and infrastructure under private markets, creating dedicated accountability for liquidity and implementation, defensive assets, and having public equities report directly to the CIO. [23:31] Internal vs external management: With ~30% of assets managed internally, Simon discusses when Aware chooses internal management versus external managers, stressing competitive edge, proximity to assets, and reserving higher fees for true idiosyncratic opportunities. [28:48] Global expansion and the London office: He outlines the rationale for the London office—access to deeper global markets, managing domestic capacity constraints, building trusted co‑investor relationships, and carefully embedding Aware's purpose and culture offshore. [31:00] "We are at our SAA in terms of illiquid asset classes, so there is no urgency [to increase]" [35:29] Role of super funds and member expectations: Simon positions Aware as already vertically integrated, with large non‑investment teams focused on member engagement and advice, and discusses balancing performance, cost, and responsible investing for a diverse 1.4m‑member base. [40:18] Lessons, mentorship, and the CIO as 'director': He shares lessons from mentors like Mark Beardow and Adam Tindall on process, humanity, and psychological stability, and describes the modern CIO as akin to a movie director: setting vision and culture while empowering specialists rather than micromanaging decisions. [41:30] Make your investment process a perspex box that you can describe to yourself, to people around you and to the people that will occupy your position in the future [49:00] The role of an CIO is somewhat akin to a [movie] director: you have to have some level of consistency of vision and consistency of what you are trying to achieve Full Transcript of Episode 137 of the [i3] Podcast Wouter Klijn 00:00 Welcome to the [i3] Podcast. I'm here today with Simon Warner, who is the Chief Investment Officer of Aware Super, which has now become a 235 billion superannuation fund. Simon, welcome to the show. Simon Warner 00:14 Thanks, greatly appreciate it. Wouter Klijn 00:17 So, you took on the CIO role at the end of last year, and I was looking at your background. I spent a long time at AMP Capital, long time at JPMorgan Chase, but you have both had very senior roles in the equity side and the fixed income side. That is kind of unusual for a CIO. Can you tell me a little bit about how that came about? Simon Warner 00:41 Yeah, well, so a lot, a lot of my career is a story of serendipity, and maybe me being active about making loads of opportunities that have come my way, but a lot of it is about a embracing the path that life has put out for me. I started, I started my career at JP Morgan, as you say, or one of the prior banks that now makes up JP Morgan, and my first job there, and the job that I had for 11 years was working on a on the balance sheet, managing the strategic interest rate and currency risk of the bank, which in many ways was sort of an internal hedge fund, so operating in, you know, the world's most liquid, most highly arbitraged markets to try to add value that then parlayed into a move into the buy side where I worked at AAP Capital, first within the fixed income team, and then my last job at AMP Capital was running equities, fixed income, and the multi-asset area, so the part of that business that used to manage the superannuation monies, but the last job I had there included the front office, but it also included all the support staff and all of the distribution product technology, etc. I then took a break and re-entered in this role under Damian Graham, my previous boss, and the old CIO here, where I took a role for him, looking after private equity, public equities, infrastructure, and property, and so over the course of that journey, I've been very lucky to have been either a direct practitioner or very proximate to decision making across pretty much everything that we do here now at Aware, that certainly I would emphasise, has not made me an expert at all of it, arguably an expert at not any of it, but it has given me a level of proximity and a level of understanding and a breadth that I do think is like you say, it's a bit unusual. Wouter Klijn 02:36 Yeah, so do you see yourself today as more of an equity guy or a fixed income guy? Simon Warner 02:41 You try not to label yourself, because they tend to be a little bit of rivalry between those two simple camps, and I think one of the things that I would, I would probably frame it differently, I think, I think you know my time at the start of my career operating in those markets that I described, I think that creates a level of rigour around risk management that is a really strong foundation for any individual within investment within the investment industry, and so I made not only have I made this journey from fixed income into equities from the public side into the private side, but I suppose I've had a bit of a journey from being a trader to being an investor, and that training I do think creates a very strong risk management ethos that to my mind is a critical pillar for a great investor as well, and so I would not proclaim myself to be a great investor, let me be clear, but I do think that foundational skill or foundational approach has been one of the things that I do hold on to. Wouter Klijn 03:50 So that's interesting. So there's the equity side, the fixed income side, and then the trading side as well. And I was sort of thinking of it. You mentioned briefly JP Morgan was sort of like an hedge fund type approach. All of those roles seem to filter quite well into, you know, what is very popular today is the total portfolio approach, where you know you look at the total portfolio and see where the gaps are, and we've looked into this recently a bit. Obviously, within a super fund environment, it's very different to implement that than say the future fund to New Zealand super, where they can get rid of a strategic asset allocation. Super funds can't really do that, they have to be true to a label in their investment options. So, what we've seen is that funds try to do more of sort of an overlay, or completion, as Canadians call it, and that seems to translate sometimes in a little bit of a hedge fund type of techniques, and we see relative value, we see global macro trade, is that something what you're thinking of as well, and what are your thoughts on TPA in general? Simon Warner 04:55 Yeah, yeah, so as you allude to there, I think. Think understanding our context and understanding our task within our context is sort of foundational for understanding about what the best way of going about our business is, and without wanting to repeat what you said, one of the features of the Australian superannuation industry, or the two features that I think are really salient, is one is that we are a DC system, and secondly, we are B to C entities, and so we operate with a direct relationship with our customer base, or our member base in our case, and they can switch at any time. We have a, we have a really tactile and close relationship with the beneficiaries of our capital, of the capital that we're lucky enough to manage for them that brings to bear a few constraints and a few features of the way that we have to operate the portfolio. One is we have a risk tolerance, obviously, but most investors would have that. Secondly, we have a binding liquidity constraint, so we have to maintain liquidity across the fund to meet those redemptions that our status as a DC and B to C entity come with say, and finally we operate obviously in a competitive system, and so we not only have a net return target, but we have a separate and discrete cost target, because the nature of the marketplace is that the member base or the potential customer base cares not only about not just about net returns but independently of that they also care about cost and so those give us some hard key constraints and and for my mind TPA is at the very headline level How do you create an environment, a culture, a system, a method of sharing information, and a method of deploying capital, such that you're optimally managing to those two constraints. So, not thinking about, you know, competition for a liquid capital, for example, on that liquidity constraint, but thinking very clearly that every time we deploy into an asset that is illiquid, it is drawing upon a scarce resource and creating environments, not only, as I say, the softer stuff around culture, but also, you know, the harder stuff around investment process and a consistency of approach that allows you to make those trade-offs in a mindful way. The thing that I would fall short of, in terms of the way you framed your question, is that I sometimes wonder whether commentary around TPA isn't code for top-down decision making. That is absolutely not the way that I would approach my task. You know, I think my role is to create an environment where, where the all of the 180 odd people on the team are being their best, and that we are creating an environment where the expert is making the expert decision and empowered to make that it's not about trying to get everybody to think in top down macro terms, it's about trying to get people to be empowered to deliver on their sphere of expertise. Wouter Klijn 08:05 Yeah, so how does it translate into sort of practical changes if you're not trying to sort of manage things from the top down? How does that translate in how you think in sort of your approach to these completion strategies, or is it more a question of active versus passive? Is it more just enabling the asset class heads to do their job? How do you think of it in practical implementation? Simon Warner 08:33 Yeah, so you know, the first, the first thing I'd say here is that, you know, a bit of what I'm about to say is me thinking out loud, it's something that we, as a group, are thinking through. What's our best approach to it? As I said before, it's we're not in a position I think where we can take a cookie cutter approach that someone's worked well elsewhere and just apply it, because our circumstances are slightly different. You know, our starting point is to try to think in terms of how do we create a commonality of philosophy and of language that is giving us a level of consistency, but not constraining each individual team to give us breadth and diversity, as well as to be able to deploy and invest in the way that is best for their sphere, and simplistically, what we've tried to do in that respect is to be really clear about thinking about individual assets, asset classes, and the whole portfolio as clearly as we can in risk premia versus idiosyncratic risk terms, acknowledging that in practical, in practical terms, it's very.. it's often impossible to separate the two, and in mathematical terms, it's almost impossible to scientifically decompose it. But what we can do is at least talk in principle, you know. Infrastructure is a good working example for some of this, but it definitely applies across the board for me, where you know an infrastructure asset that has more equity. Risk and is in a particular sector and is in a particular jurisdiction and is one of the very best assets that we can think of, given all of that, that's a cascade of a combination of risk premia that we would expect to get rewarded for over the medium term and more asset-specific idiosyncratic risk, return risk, risk elements, thinking about that clear headedly, or even just having a framework where you talk about those that combination openly has been a way to unlock a level of holistic thinking, so to what extent have you got a an infrastructure or property portfolio that has embedded in it risks that are not that were not incorporated in your capital market assumptions when you did your SAA, for example, and then what does that mean, thinking about where you've got either diversifying or reinforcing risks across the portfolio rather than just thinking about them in one sector, now to support that language is a good, is a good first step, and then to support that with some level of consistency around your analytical framework, so thinking about, you know, your ex ante IRR models within private markets, for example, as being a waterfall of different risk-free country sector and equity risks, and then that there are parts of the business case that you might want to, the ex ante business case, that you, you label very clearly idiosyncratic risk, it's a particular efficiency uplift within the asset, it's a merger plan, maybe, or it's a divestment of part of the business, so just thinking about that in those terms and having some level of consistency, so that you can create a conversation around those trade-offs. Wouter Klijn 11:48 So, in that example of the infrastructure investment, are you looking to pull apart the different drivers of risk and return within that investment, where you look at what comes from factors, what comes from idiosyncratic risk? Is that how you look at it? Simon Warner 12:02 I think again, acknowledging that we don't want to be the tyranny, we don't want to have false specificity because we're putting a number against something, it's not necessarily mean it's scientific. So I want to be very clear about that. A lot of this is about directionality and about intent rather than trying to break things down in a scientific way, but that's absolutely right. Yeah, so I think in terms of, you know, what are the characteristics that we wanted that we're seeking from infrastructure when we think about the SAA, what are those correlations in normal circumstances? What are those return objectives? What are those, you know, in the case of infrastructure, what are those defensive characteristics as well? Then getting quite clear about how individual assets and then the portfolio as a whole is mapping back to those characteristics, to what extent through quite appropriate risk-seeking behaviour are we layering in other factor exposures that might be optimal ways of allocate of accessing those factors, by the way, and then on top of that, being really clear about where idiosyncratic sources of return come in, the reason that this is important from not only a portfolio risk point of view, but coming back to that other constraint that we have around cost, is because at least in principle, borrowing from the more scientific environment in public markets, you prefer to have your external pay aways dedicated to idiosyncratic sources of return that you can't replicate, you know, so you can't create that scientific separation, obviously, in most private asset classes, you can create a conversation that helps you make better decisions. Wouter Klijn 13:33 So it's not, you know, a clear scientific separation, but does it change the way that you think about the role of active and passive strategies and passive enhanced strategies in the portfolio? Simon Warner 13:44 Just sticking with private for a moment, so you know, one of these, or this conversation that we've had up until now, that's part of the reason that we bucketed private equity, property, and infrastructure under one banner of private markets, under my colleague Jenny Newman, to create an environment where we can make some of these trade-offs. It's not quite your question, but let me just go on this tangent for a moment. You know, I do think that over the next 15 or 20 years or so, as data becomes more available and more granular and more and more trustworthy in private markets, you'll be able to create the environments where you can be more scientific about some of the portfolio risks, and so thinking in these terms is, I think, a prerequisite for taking advantage of that forward-looking data world, where you're going to get a better sense of individual assets and their risk exposures, and the performance of them, and what is really driving them. So, that's that's one of the things that we're seeking to do. I do think, as you say, a lot of it does come down to are you creating analytical frameworks both within asset classes and then across, where you're being as optimal as you can be, acknowledging that it's ultimately something of an art and something of a science about passive or factor exposures you'd rather not. Pay for, and you'd rather you'd rather label that explicitly, that we're trying to just get some sort of benchmark or beta or factor exposure, and then we've got this other part of the portfolio, which we're very happy to pay up for, that is giving us things that are really unique. Wouter Klijn 15:14 Yeah, so as part of that, getting that clearer picture on the portfolio, and you alluded to this a little bit earlier, you've made some changes in the structure of the investment team, where you basically have now the asset class heads reporting directly into you. Can you tell me a little bit about the thinking behind that decision? Simon Warner 15:34 Yeah, so you know, thinking about the key strategic challenges that we have, which is to perform in a competitive industry and to deliver at a competitive price. What are the key challenges, or the key, the key problems that you've got to solve for in order to deliver that? Well, it's delivering optimal returns for risk, it's delivering optimal returns within a liquidity constraint, and it's delivering, it's allocating your, your cost of the cost to construct your portfolio optimally, that was one of the principles around the organisational design. The second principle was a level of representation for major parts of the portfolio as direct report of the CIO, and thirdly, we wanted to create an environment where that leadership team did have a set of really diverse perspectives to solve the difficult higher order problems that we have, both as portfolio managers, but also as business leaders of the investments team, and so the key changes we made there were one to bucket infrastructure and property under one overarching organisational design, creating a lot of freedom within those to be this for the specialists to carry on being those specialists. So we have terrific sector heads across those three, and they are still responsible for investment performance within those sectors. It's Jenny's task to create an environment where the holistic is better than just the individual health. The second piece we did was to create a level of dedication and focus around implementing the portfolio as optimally as we can, so internally we call that implementation alpha. The way that that manifests itself in the organisational design is to create focus around liquidity and markets under Mike Clavin, so really, go against making sure that we are optimally implementing all the changes that we need in the portfolio, deploying cash when we can, minimising our cash drag, making the most of our balance sheet, interacting with the marketplace in the optimal way. You know that that's appealing to us, because it's it feels like lower risk and more stable sources of uplift, or at least avoiding slippage, seems like the first thing we should be trying to do. The second piece was creating a level of dedication around defensive assets under Sonia Bailey. You know that will be an increasing part of the portfolio as our member base ages, and we move more of our cohort into more defensive or pension-like options, and then finally creating public equities as a direct report of the CIO, you know, public equities is the biggest single source of liquid of capital allocation for the fund, it's the thing that drives outright performance the most, and it can often be one of the things that drives relative performance a lot as well, so having a direct line of sight was important for me there. Wouter Klijn 18:22 Yeah, now before those changes took place last year, Aware Super also codified its investment beliefs for the whole team to have a consistent framework to basically follow. Of course, a lot of those things were already more or less informally ingrained, and it's sort of split out in four different parts. Some of it we talked a little bit about already: active management, the belief in active management, understanding risk, and getting compensated for risk, being a long-term investor, and operational sort of implementation. If you look at those ones, how does that sort of inform your investment philosophy today? Is that you equal weight those investment beliefs, or what is driving your, your investment philosophy? Simon Warner 19:12 Yeah, so you know, one of the features of taking this, this role at this time is that I'm really lucky to be standing on the shoulders of giants, so I inherit a team that has been, that has been built over a long period of time by my predecessor, Damian Graham, and the leadership team are all people who were part of the team prior to me taking this role, and so I feel very privileged to have taken on a great team with great bones, and many of the much of the difficult building work of getting an investment capability off the ground has been done by the great people before me. So my core task is to try to optimise that that blessed position that I've inherited in terms of these investment beliefs. As you sort of allude, many of them have existed for quite some time, and there's quite a lot of flexibility to interpret those in a number of different ways, and to be honest, that was one of the features of creating them as investment beliefs, because we do believe that, as a, you know, as an asset owner, as a universal owner, but also as a team that has that internal capability, we not only have breadth where we are assessing the whole of investable universe, but we also have depth where we've got the top-down more macro decision-making capability, but we've also, at the coalface, got India, you know, stock selection capability in equities, for example, obviously across our private market suite as well, and so we want to create a set of principles that are fit for purpose for that whole canvas. It's not very easy, and we've complemented them, as I say, with a level of focus that builds, I think, upon some of the language around being clear about alpha and risk premia, about being clear headed about how we are getting the most for anything that is scarce, whether that's liquidity or fee or risk, and that over time I'm hoping and expecting will create an environment where we all talk the same language, but we are all empowered, like I say, within our own areas of domain expertise to really go off and get the best opportunities for our members. Wouter Klijn 21:31 So, one thing that it doesn't talk about is internal management, and I think Aware is currently at about 30% of assets are managed internally. What are your thoughts about internal management going forward? Is there sort of an ideal number, a magic number? Is it a 5050 split? Simon Warner 21:50 Yeah, Wouter Klijn 21:50 What is your thinking there? Simon Warner 21:51 I think in many ways it's a, it's a bit of a copy of before, so we, when I think about across the board, we've got the ability to deploy through third party managers or directly ourselves in pretty much every major asset class, so that that basic capability build has been done, and we're now in a privileged position to make a really informed and and discreet choice about under what circumstances, either within or across those that opportunity set, we're better off doing things ourselves versus giving it to an expert or an external expert. I suppose there are a few dimensions that that I try to bring, or we as a team try to bring to the table when we think about that. One is a level of humbleness around what our competitive advantage is as an investor in any given investable universe. What's our proximity to that investable universe? What's our kind of innate competitive advantage or edge versus other participants? So, you know, simplistically, I suppose Aussie dollar cash might be something where you think, well, we've got quite a high level of adjacency, but quite a high level of proximity, we should be able to think that we've got a similar information set to the very best actors in the marketplace, and so that's something naturally I think we could do ourselves, mostly same is true, maybe of core property in Australia, there are some other activities that we're either a long way away from the ground when it comes to what's being invested in, or the very nature of the activity is so diffuse and so also specialised that we've, it would be, it would be hubristic of us to claim to have kind of a natural competitive advantage, so you know, VC global VC, or global mid-market PE, just a huge and broad investable universe, you know, a lot of it, a lot of it, a long way away from where we sit for this conversation in Sydney, and the bulk of our team is still based in Australia, and so we've got a level of humbleness that that's something that we would prefer to partner with. Now, there's a whole raft of stuff in the, in the middle, so the other, the other spec, the other dimension that I would bring to that is the same as before, and that is, you know, again, I often come down down to infrastructure as an example, because it's just such a rich asset class that illuminates that it's not because it's always on my mind, it's just it illuminates a lot of these principles, you know. We would much rather, we would much rather, in principle, partner with an external manager and pay them really heavily aligned economic fees for an asset that's got lots of idiosyncratic risk that we can't access without them in principle, if we can access it without them, and it's largely beta or risk premia that we can get our head around on a desktop. We'd rather not pay that fee. We're not necessarily doing that to save outright cost from our current position, because I feel like we've got the ability to manufacture. The portfolio very economically, but it's about making sure that we're rigorous about allocating that scarce resource fees as optimally as we can. You know, we pay away a lot of money to external managers, and it's one of our core responsibilities is to make sure that those are allocated really effectively for the benefit of our members. Wouter Klijn 25:19 Cost is always an important driver in that debate, but one of the benefits, as well, or one of the problems that you're trying to solve with internal management, also has to do around capacity constraints, and especially as the fund grows larger and larger and larger in places like Australian equities, it becomes increasingly more difficult to allocate in an active external way, are you at one point forced to just take on more internalisation? Simon Warner 25:47 I feel like we're quite a way off. I think in terms of being able to get risks set in the market in a way that is manageable, is diversifying, and is accretive to the whole portfolio, we're not yet bumping up against some of those considerations. I feel like it's less of a, it's less of an internal external conversation necessarily than more being increasingly scientific about where capacity constraints might bump up against expected information ratios, and where in one particular domain do you hit a capacity constraint? I mean, the most obvious one, I suppose, in our domestic environment is it would be small cap equities, where you know to what extent is there a capacity constraint there, but that's that's the same philosophy I think we can apply elsewhere as well. At the moment, we're a large investor in the Australian superannuation context, but we're still a medium to large investor in the global context, and so there's plenty of space, I think, for us to grow. Wouter Klijn 26:48 Yeah, yeah, fair enough. Talking about that international context, Aware has opened an office in London and made some commitments around deploying money there as well. I think the number of 10 billion has been thrown around, obviously. That is constrained by, you know, your fiduciary obligation to your members. It has to make sense. It has to stack up as an investment. But what is your, what is your idea about the role of these foreign offices to the fund and future plans to expand the footprint outside of Australia, Simon Warner 27:23 So you know some of it interfaces with the question you just raised about about capacity constraints domestically, so I do think it is true that the system and ourselves as one of the larger investors will continually continue to seek pools of liquid capital markets where the liquidity is there for us to be able to deploy without so much cost, and so without so, so much consideration of capacity constraints, and so global allocations, I think, over time are going to creep up as we find the domestic market becomes more saturated. So that was a big reason for launching the London office with that we did about three years ago. We again are very blessed to have inherited a situation where that London office has been, you know, formed by two great leaders, Damian Webb and Jenny New March, who went over there and helped form that office, helped him help higher up the private equity infrastructure and property teams that are there, as well as the spine of support functions that we have in London. I think our task there, and that has yielded results already for members, so we're getting good pipeline. I feel like the Australian, the Australian investor base in general, is well thought of in Europe, and we're well known now as a cohort, so we're getting good access to, I think, we, as aware, are trusted counterparties and trusted, trusted co-investors, and so we're getting good access to good deals, and we're beginning to deploy, I think our task in the next two or three years, at least, is to consolidate on that, both from a business point of view as well as from an investing point of view. We are at RSAA, broadly speaking, in terms of most of our illiquid asset classes, so there's not the urgency that we've had in previous years, to get capital deployed, we're really thinking about optimising these portfolios from here on out. That's not to say that we can't add extra strings to our bow in London in the next few years. You know, there are some obvious areas where we think we might be able to put people on the ground there to give us better, better capability and scope for better, better outcomes for our members, but it's, you know, any business that makes its initial foray into a different time zone, into a different culture, especially, I guess, for us and our system, you know, we are in, we do have a unique ownership model, and that comes with it, a relatively unique culture as asset owners, as part of these bc entities that we spoke about before, as part of a member of profit for member organisation, you know, how do you create sustainability in foreign jurisdictions around the nature of who we are as an employer, of who we are as an investor, and the nature of our beneficiaries, who are very, you know, they're unique. Relative to others, and making sure that we really embed that in a sustainable way, we want to do that in a really considered and focused and thoughtful way. Now that we've now that we've built that office off the ground and up and running, Wouter Klijn 30:14 So does that mean that you want to be largely maintain an Australian-based organisation with its staff, the majority still based in Australia, and I asked that in particular because you mentioned you might have to look beyond liquid assets within the London office, see what other opportunities are there, and obviously we have the example of Australian super having moved pretty much their entire global equity capability to London, building out an internal team there, is that something that's on the cards as well? Simon Warner 30:48 So, you know, I think the fund is going to be around for 100 years, well past me, and over that period of time, it would seem natural to me that we become a more globalised organisation, it will be the decision, the decision rights of people who follow me, probably about the pace of a lot of that. I think my task in this, at this stage of our historical evolution, is to create a legacy of very strong foundations around how we take a domestic business and make it a global business. I suppose my perspective is that I think that that's not that is not a trivial task. It's a difficult task. It's a difficult task to thrive in environments that are not, not, not close to a home base, especially when you've got an organisational identity that is very much you, you know, I think that aware is aware as a profit for member Australian Superannuation Fund, and that makes it different from other investors and other employers in as we go into these other jurisdictions, you know, one thing I think that is non-negotiable in investing and in business more broadly, is real alignment with purpose and culture, and we need to be really clear that the alignment that we create around purpose and culture is really enduring in those foreign offices, because they come with enormous opportunities, but these, these initial forays, at least, when you're still forming and haven't necessarily been stress tested, it comes with some risks as well. It comes with risks around individuals, it comes with risks around around how you deploy. It comes with reputational risks that we might not have full visibility into at the moment, and so it's a careful, considered approach. But I think over the very long term, it's natural that we're going to be heavily, heavily populated with folks outside of Australia, just not in the next two or three years. Wouter Klijn 32:47 Yeah, yeah, fair enough. That expansion is still sort of along the lines of super funds as basically managers of asset expansion, assets for members, but as funds grow and as we head towards more, more people shifting into retirement, the argument can be made that super innovation funds will have to become more like full service organisations, and sort of thinking about your background at A and B and at JP Morgan, do you think, do you see at one point, where super funds are no longer just investment houses, but become more, you know, fully vertically integrated financial services companies. Simon Warner 33:29 Well, I think we are already vertically integrated in the sense that we have that direct relationship with our customer. What really differentiates us from other institutional investors, you know, sovereign wealth funds, European insurance companies, or the UK pension cohort, or the public schemes in the US, is that we do have that direct relationship with the customer. We've spoken about what that means for the management of the portfolio, but what it also means is something about the entity itself. So, at Aware, we've got, you know, 1700 odd people, about 10% of them work in the investment team. The rest of them are focused around the other activities of the fund, obviously administration, but also very much so around connectivity with the member base, about ensuring that they are, you know, well informed, well cared for, and that we're helping them with their journey through accumulation into retirement, as you say, and so in many ways to my eye we are already there. I wear different hats in this role in different contexts, but one of the hats that I'm wearing very frequently is as a member of the executive group. You know, I'm very lucky to be working for the best CEO in the industry, but we at the executive level have a, you know, we're not focused on the on only on the fund and on investment performance, we're focused on all sorts of other metrics around the health of the organisation and the benefit that we're delivering to members and the sustain. The long-term benefit that we're delivering to members, and so in many ways we're already not purely an investment house, we are a, you know, a member, a member service organisation that is obviously, we do know this sole purpose test that our core purpose is to deliver, deliver income in retirement for our member base, but doing that is not just about buying low and selling high, it's about creating the environment and the connectivity that we're assisting that group through not only accumulation into retirement, but then also as they go through retirement, how do we make sure that they're in a position where they're making the most out of their hard-earned money. Wouter Klijn 35:36 And I think Aware also is unique in that situation where it said for many years a strong base in financial planners and employs its own financial advisors. Do you sort of do you get feedback from the member base on ways that influence the portfolio in terms of how they think about investment options, and you know what they understand of investing in how to translate in how you can communicate it? Simon Warner 36:04 Yeah, well, you know, working as a, as an investor within aware, you know, one of the wonderful things is the connectivity with the end beneficiary. So, the end beneficiary for us in our situation is not, you know, a member number on a, on a spreadsheet, or it's not a, you know, a pool of capital that's for the benefit of a, of an, of an unnamed set of cohorts that are made many steps away from you. You know, we, we can hear about the human stories of our members on a daily basis, and we really go out of our way to expose ourselves to that, and we go out of a way, our way as an executive group to really share some of that, in terms of your question. Absolutely, we get, we get real, real time feedback on the way that we are performing, both, which we welcome, both in terms of our outright performance, our relative performance, but also the kind of way that we go about our business, you know, one of the things that we haven't articulated so far in the conversation is, is member expectations that are beyond that price and return target. There's also a general expectation upon our member base that we operate in an ethical way, and we do the right thing, acknowledging that the right thing means different things to different people, and on our member basis, 1.4 million Australians, and that represents the gamut, the spread, and a spectrum of opinion on on any matter we might want to put on the table, and so we're not in the business of of ethical investing, we're not in the business of aligning to an ethical framework, we are in the business of managing responsibly and managing to their long-term benefit, but fall short of, you know, some of the more active impact style investing that others do. Although there are parts of our cohort who would like us to do that, we're lucky enough to be able to provide investment options for them, which are a little bit more along that part of the spectrum, and so they're welcome to invest with us through those kinds of options, but we've got to be respectful for the for the big lump of co of members who are not daily engaged in their balances or the way that we're operating, and we're doing the right thing by them as well. Wouter Klijn 38:18 Yeah, yeah, so we started this interview discussing your very background in equities and fixed income, and even sort of the hedge fund type strategies. If you look back across sort of the very different organisations that you've worked for, are there any lessons learned that you could share with our listeners? Simon Warner 38:38 What I mean, I again, I would lead with I feel remarkably lucky. I feel remarkably lucky for the organisations that I've worked for, and remarkably lucky for the people that I've worked for. You know, the very best organisations and the people that I've worked for. It's been, it's been a real alignment of culture, it's been an alignment of personal development, it's been an alignment of principles to me. Those are really sacrosanct. I think I've been given, you know, I owe a lot to Mark Beardow, my first boss at AMP Capital, in one specific professional way, and then one personal way, which I'm also happy to share, but his level of rigour around an investment process, articulating an investment process, making your investment process a perspex box that you can describe to yourself, that you can describe to other people around you, and that you can sub, you can describe to people who will occupy your seat into the future creates a lasting legacy for the organisation, and creates a lasting asset for the organisation, and that's one of the primary things that we're tasked with doing, is not just delivering returns today, but institutionalising the way that we operate into the organisation, not so that the way that. Operate today can persist forever, but so that you've got a framework for improvement, for improving it, and enhancing it. And Mark really, really drummed that into me. The other thing that he drummed into me was a level of humanity and a level of care for me was I was going through difficult periods in my personal life, and he was always there for me. And through those sorts of experiences, you, you know, you really breed loyalty and more, even more motivation. Wouter Klijn 40:26 Yeah, Mark is a great guy, and I think a lot of his background has dealt with investing in sort of an insurance context, which, of course, places a lot of emphasis on risk management. Has that sort of influenced you? Simon Warner 40:39 Yeah, that's right. I mean, so, so that time I spoke about when I was with First Chemical Bank, then then Chase, and then JP Morgan, you know, the in that sort of very liquid, very fast moving, you know, more dynamic hedge fund space. Frankly, I found that very difficult. You know, I think that that is a very difficult task within, within of the spread of things that you could do in financial services, trying to figure out where interest rates and currencies are going. You know, the most highly arbitrage markets in the world is not an easy task. It forces you to be really rigorous about the way that you're thinking, and it forces you to be really rigorous about risk management. Interplaying with that, it forces you to be really rigorous about your own personality and how you create an approach to your task of investing that is congruent with who you actually are, what your risk tolerance is, and what your strengths and weaknesses are, and be really scientific and open about that. There's just not a lot of room for ego in that space. It will find you out very, very quickly, you know. Mark really embedded that into me as well, and I, like I said at the start of the conversation, I really hope that's one of the things that I've brought to throughout my career is a real focus on thinking about our role, whether it's if you are a trader or if you are an investor, the thing that you are as well is a risk manager, but that's the core lens that you should bring to the task of your role every day, in terms of deploying the capital in the portfolio, Wouter Klijn 42:03 So Mark was one of your mentors. Do you try to fulfil that role for others within Aware? Do you have sort of a more or less formal structure for trying to develop mentorships? Simon Warner 42:14 So you know one thing he was very good at, and then my final boss at ANP Capital Adam Tindall was just a master at it was, how do you, how do you toggle between being a teacher, a coach, and a mentor, stroke sounding board, maybe just a sympathetic ear. It's easy to drop into one of those roles, but being that the right persona for the right conversation at the right time is is extremely important. So, I had an early boss today at Chemical. He was very supportive and a total expert at what he did, but he was completely hands off, right? He was like, 'You go away and the best way for you to learn is to make your own, your own mistakes. I think, in hindsight, I would have probably preferred him to be more of a teacher than a coach. At that stage in my career, I needed somebody who said, 'Look, this is the way I do it. It might not work for you, but this is the way that I do it, in specific detail, and I encourage all of the folk on the investment team to be that person in some circumstances, then in other, in other circumstances, you're going to be well, look, this is the way that I would, I have approached in the past, it doesn't seem like it maps directly onto this situation, and indeed, you know, my, my approach is probably stale relative to the way that you could perform it, these are some of the principles you might use. I'm here to help you assess whether what's good or bad. I'm here to coach. And then there's the other end of the spectrum, where you're, you know, you're the psychologist or the sounding board or the mentor, if you like, where you're there to help create psychological stability within the person to be the best that they can be, because it's a hard game, isn't it? It's a hard game because you can't be blind to investment performance, that's ultimately what you're here for. And there are a cohort of members in our case who does, who do deserve and demand us to be delivering returns for them, and yet, if in investing you are focused on returns, you will lose the game. You have to be in a, in a position where you're relentlessly focused on the method, that relentlessly focused on the process, relentlessly focused on your inputs, acknowledging that in many cases that is going to lead to things that you regret doing, you know, if you're not making investments that don't go 100% according to your, your preconceived plan, you're probably not doing enough, you know, and even if you're even if you've got a perfect, a perfectly conceived investment pro. Process, it's going to be wrong a lot, and how you create an environment where you're able to manage that specifically within the portfolio, specifically within an asset that you manage, but vitally within yourself. How are you able to create a level of dispassion and detachment that's not at the expense of some of the gut feelings that we all have. I'm not suggesting we become automatons, but I am suggesting you need to create an environment where you are turning up to be your best every day, and that is a unique question for all of us. You know, some of some people just kind of have it, don't they? Some people, and I would, I would confess that I was one of them. And when I was younger, I would, I would feel my mood, my heart rate by my P and L, and that is not a sustainable position to be in to make good decisions. And so, so a large part of my job now is is to create, making sure I'm creating those environments where not only the leadership team but everybody in the team has that psychological stability to be their best. Wouter Klijn 46:12 It's interesting that you say that, because we had a discussion here at [i3] in the last couple of months about the role of a CIO: are they still investors, or have they moved on to become more managers? Yeah, it seems that you're thinking about that same sort of sort of plan, where you're basically moving more towards the management style rather than a pure investor. Simon Warner 46:34 Yeah, so you know, I don't often have conversations with people that last more than half an hour, I don't start bringing up movies, so I do think that the role of a CIO is sort of akin to a, it's sort of akin to a director, where you do need to have some level of consistency of vision and consistency of what you're trying to achieve, but you've got to have the light touch that allows that acknowledges that the task is extremely specialised and probably becoming more specialised as we speak, and that the worst possible thing is for a generalist to come in and try to replicate or second guess a specialised task, and so what I'm trying to do is do both of those things at the same time, me with the leadership group creating a level of consistency about what we're trying to achieve, how we show up, what we really believe in, what are the key principles that we really believe in, and what's our intent here. We're not, we're not acting without intent, but we're acknowledging that the extremely diverse and specialised expertise that we have here on the floor, and then one level of separation around where we go down into our manager base, we're in the privileged position to try to maximise that, not to go in and question it, and not to go in and try and try to replicate that level of specialised knowledge, but not to disempower you by, you know, fall into the trap of being disempowered. You've got to have your hand on the tiller, and you've got to know the direction you're sailing, but you can't make every call. Wouter Klijn 48:12 Yeah, yeah, fair enough. So, CIO is a movie director. Simon Warner 48:16 Oh, don't, don't quote me on that. Come on, Wouter Klijn 48:17 You're on the record. I think that's a good title for my next project. Simon, thank you very much for your time. I see we've run out of time, but thank you for your insights, and it was great talking to you. Simon Warner 48:31 Thanks a lot. I really appreciate you, and I appreciate everything that you and [i3] do. You play a really important role in our community, so thank you very much. Wouter Klijn 48:38 Thank you.
