Super funds to 'look more like insurers'

The type of software and platforms superannuation funds will need to handle the 'grey wave' over the course of the next decade may put pressure on existing systems, especially as super fund investments continue to broaden.

Speaking at the AM Tech Day summit in Sydney, Finbourne Technology chief executive Thomas McHugh said Australia's super funds are approaching a major change to how they conduct business.

"There is a historic separation that I think will break down over the next few years. There used to be a separation of 'I'm a long-short equity manager' or 'I'm a fixed income or alternatives manager', but the reality is that if you look at the super funds here, at some point they're going to become net payers, and that's at some point over the next decade, or a bit more," McHugh said.

"So, then they'll look a lot more like insurance companies, but actually they already look a lot more like alternatives managers and asset managers. So, there is a need for a single system that pretty much does all of that, the 'holy grail' of a single platform that can represent every asset class and can look at your rate charts."

McHugh said a single platform that can determine cash flows, predictive analytics and the behaviour of all asset classes would be a game-changer for the industry.

"Because my five, 10-, 15-day, one month, 90-day cash flows will need to be 20- or 30-year cash flows and it needs to include all after-scenarios that at the minute, systems can't cope with," he said.

The issue of being able to create this all-in-one platform is made all the more difficult by an increasing amount of investment in private markets, which has traditionally been very opaque.

Accelex president Michael Aldridge said trying to standardise procedures, and working out how to include investments in private markets into a total portfolio view is a difficulty many firms are facing.

"Anyone who tells you that things in private markets are going to be 100% automatable are just wrong, but I think we will come to a point around standardisation," Aldridge said.

"Right now, it is the Wild West. If you go back around 25 years ago in capital markets, we were probably going through a similar maturation process."

Aldridge said incorporating new technology like artificial intelligence may be an effective way to automate workflows.

"From a workflow point of view, whether it is to your treasury system to manage cash, a portfolio monitoring system or pot-investment monitoring, you need to know how to consolidate the content that is coming in at scale, in volume, and is unstructured," Aldridge said.

"[Funds] need effective tooling to be able to quickly and efficiently turn that information into confident data that can be worked with as a key part of people's operations."