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Sonya Sawtell-Rickson

lines on the record: 79
first: 2023-10-09
most recent: 2023-10-09
sittings or episodes: 1
sources: podcast

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“If you think about top-down sort of macro portfolio construction, all of our whole of fund rebalancing, that all sits in our portfolio design team. On the other side, we sort of call it our bottom-up team. This is the team that's either selecting securities in markets or selecting assets or selecting managers. So they're much more directly involved in markets and operating in a more micro level every day. Really what we want is for those two teams to come together in the middle. I often talk about co-CIO ship that I expect my two heads to be thinking like I do, not in their silos, not thinking from their perspective only, but really coming together and looking at the entire picture and saying are we achieving the best outcome for our members. And I think that culture is embedded throughout the teams, that leadership of collaboration, of prioritising the whole, of really thinking deeply about the insights for markets.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think the reality is this is change financial professionals aren't necessarily trained in these things. We definitely need a team that cares enough about the problem to be willing to invest the time and energy to try and solve it. So we talk about being solutions capital. We want to think at the problem level, the system level, and then figure out how we can use capital to earn a return and help solve the problem. Now that requires people to lean in, to have a real growth mindset, to try and understand problems that might be outside of their day jobs. And really, like a lot of it's scientific, you know, to really think and absorb a lot of scientific information to try and understand the impacts. So we've done a lot of work on growth mindset. We talk a lot about finding space for people to be curious and pursue these things. And I think that's a really important part of being successful in change.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because we are universal owners and we do have exposure to the subsequent risks. So we measure the real economy, carbon emissions and whether they're moving down at the trajectory that we need to achieve to halt the temperature increase to sub two degrees. I think we're spending a lot of time on those elements to really try and make sure that we're focusing on what matters and we're measuring what matters most.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are using those taxonomies and we are reporting publicly on our investment aligned with the SDGs step one. We're also part of a pilot program with the Harvard, the Impact Weighted Accounts, which is really trying to start to translate externalities, both positive and negative, of companies, into financial measurements such that they can be looked at alongside the P&L of a company. So I think that's a really interesting way of starting to assess what our company's really contributing to society, both financially and indirectly through impact. We're starting to think about what aggregate measures we might want to be able to see move. So climate's an easy example. We know that we don't just want carbon emissions to reduce in our portfolio. That would be easy. I could just sell everything with high carbon and be done tomorrow. But that is absolutely not success for us. Success is reducing carbon emissions in the real economy.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's hard. So we have spent a lot of time on this trying to figure out how do we translate what we do into measurable performance outcomes. So there's a number of layers. The first is there are taxonomies now starting to emerge that take your portfolio and can actually”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“They can be. We don't have a lot of hedge funds in the portfolio. I think if we did, in some ways you almost need to update your risk factors regularly because especially you say you've got a directional macro hedge fund, they can go from materially long risk to materially short risk. And if you're not capturing those changes in the portfolio, then you're not really understanding your aggregate risk position.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think you've got to look underneath the hood a little bit on understanding the factors that are driving these alternative asset classes. And look, risk models are getting better at modelling things like real estate, for example. I think we've got really good history on data for real estate markets and risk models tend to draw on that data to forecast. Infrastructure is a bit more challenging. So I think infrastructure, you're sort of looking at combination of duration risk, obviously. Often you've got leverage in there. might have some inflation factor exposure depending on the type of infrastructure, as well as growth exposure, regionally depending on where the asset is. So I think when you're sort of mapping your asset exposures to your risk framework and your risk models, being able to sort of use those factors to do so is really helpful.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not big tilt, so we're not going plus or minus 30% equities. And that's because we have the product by definition is in a risk cohort. And so we are limited by the ranges that we publish to our members. But within those ranges, when they're broadly plus minus 10% equities that we can move the portfolio, and obviously with other risk assets added, it can be a more material risk move, so short credit alongside short equities and maybe short other risk assets can help protect portfolios from downturns and also add risk when we're positive.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“How volatile markets are. If markets are volatile, we could be trading every day. If markets are relatively calm, we could sit on our trades for a month.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Every day. So we run our models every day. Obviously our fair value tends not to move materially every day and what really is more volatile is price. So by running that every day, we can take advantage of market volatility as price moves forward returns change and we feed that into our process.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have a dynamic asset allocation process which forecasts returns and also risk and we bring that information together as we're looking at the portfolio and forecasting how we think we'll perform against our objectives. And based on that we might make portfolio tilts. So we might add equities, we'll go short equities, we might add different types of bond exposures when we're worried about markets we might add more government bonds and less credit for example. So really those DAA metrics alongside our objectives informs how we tilt the portfolio.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“It won't surprise you. It's a balanced growth fund, so it does hold a reasonable amount of growth assets, a significant amount of equities, around 58%, including private equity. We've got around 16% in real assets, so infrastructure and property to give that inflation hedging characteristic. A small amount of alternatives around 2%, and then a 24% allocation to global debt and cash really to provide the diversification and ballast.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“We offer a number of products, but almost three quarters of our funds are in our MySuper default balance growth option, and the real return objective for that fund is CPI plus 3%.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“So again, important objective, how we want to make sure that what we're doing at an effective and really low cost and creating value for our members. So again, making sure we achieve fee targets and continuing to drive that scale benefit for our members is important. And then everybody ultimately has incentives around leadership. We want people to collaborate and drive the culture and be the leaders that we need in our business. And so I think that balanced scorecard approach around leadership, risk management and really driving the culture that we need to be great investors is also important.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a real return objective. And the reality is one of the most important things for us is maintaining our members' trust. We need them to believe and understand that we are acting in their best interest and trying to manage all the risks to generate their retirement income. We think the best way to do that is to also perform really strongly relative to our peers and our competitors. So one of our objectives is to continue to maintain that relative performance, but also we have objectives related to the responsible investment of the capital. So obviously we are committed and we were one of the first major funds in Australia to commit to net zero by 2050. We set ourselves an interim target in 2020, a third reduction in our carbon emissions by 2030. And pleasingly, two years in, we've achieved that objective. So we've increased it to 50% now. That's embedded in our incentives. We're also now targeting a 10% allocation to climate solutions by 2030.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Their approach at the moment. I think we should be moving out of credit and into sovereign, or I think we should be moving out of value add and more into core or vice versa. So they're helping us to craft mandates through time that make sense for the total portfolio, but ultimately our top-down teams are also assessing those recommendations and going, do they make sense in the total relative to other risks in the portfolio?”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“As you would expect, we start with objectives when we're sort of translating into what matters most for our members and for our team. It really comes down to are we achieving those real return outcomes over time. We also publish and look at a score called Retirement Readiness. So our ambition as a business is not just to invest in and for people who make our world better, but also to help our members face a future with confidence. And so building their retirement readiness through time and seeing that score increase is really important for us. We still ultimately have to find a way of structuring the decision making down. So of course we do still translate into mandates that we provide to individual teams, but the crafting of the mandates is actually a very iterative and team-based approach. So we want people who are asset class specialists and deep understanding of their markets coming to us and saying, look, I actually think this benchmark is creating risks for the total portfolio.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Team in a productive way and having that bench strength to be able to do that really helps us to navigate those moments effectively and build conviction to take positions.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the way we've structured the team and the way I believe the best investors sort of attack markets is with a total portfolio approach. So very much embedding in the entire team a deep understanding of those investment objectives, a deep understanding of what matters most for our members, so moving away from individual silos, very much focused on their world and their benchmarks and bringing everybody up to the top to think about what is the total portfolio impact of that decision or the total portfolio insight from that information. TPA is as much about understanding as it is about culture and mindset. So you also want people to understand that the information that they have is not just relevant for their process, but relevant for others. So that ability to collaborate and to share insights and come together and challenge each other is critical to success. And at times of chaos, obviously getting all of those perspectives into the”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Australians as members, the membership is 80% female and they come from the health and community services sectors. So they have quite high expectations in terms of how we are responsible stewards of their capital. They really want to see their capital, not just generating strong financial performance, which is critical for their retirement incomes, but also to be invested responsibly. So we knew responsible investment was going to be critical. My personal view on markets is very much that they tend towards being complex adaptive systems. I think we can talk about them as complex environments. There is a level of predictability and we do think markets are somewhat predictable over the medium term, even though the forward returns and risks and correlations at time varying, we can put some structure around understanding those things. But they also have a tendency towards chaos. And in so doing, they require a different type of skill set.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was quite fortunate coming into Hester because it was an inflection point for Hester in terms of the investment capability when they'd really decided to now start to internalize and insource and really build an investment team. So I did have that moment of pause just to think, well, it's not often you get a blank sheet of paper to build a team and a process and really what type of process do I believe is going to be in the best interest of Hester's members. I think you always start with the objectives. What really matters for the business, what really matters for the members, and how do we make sure that we bring our identity to life in our investment process. And what was clear is what matters to our members obviously is generating retirement income and achieving real return so that they can actually have purchasing power in the future. So that focus on real return generation as well as managing the tails was important. We have over a million”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Often different sustainable options, some offer direct investing, and just in terms of the investment strategies, they've definitely become more sophisticated, a lot more alternative assets, a lot more illiquid assets, a lot more internal teams that might be sort of managing payoff structures. It's really been a journey and a maturing of the system.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think in the early days they really started as traditional balanced portfolios. They were 70, 30s, they tended to be quite straightforward. There was active management but tended to have maybe some property, but not many other alternative assets. There were defined benefits, but they tended to be invested very similarly at the time. And there wasn't a lot of investment choice offer, I'd say back then. Roll forward to today. We have defined benefits still in Australia, but most of those are closed. Those that still run tend to be often run with more of an asset liability matching model, so they're much more inflation and interest rate aware. And then on the accumulation side, I think the product offers obviously expanded quite significantly such that you have your default MySuper options where if nobody nominates an option, that's where they go. But a lot of funds offer choice now across different risk profiles.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“took a process to bring equality and equity into those two arrangements and really start to make superannuation accessible to everybody because everybody really deserves dignity and retirement”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have been in the 90s. And the pension industry at the time was still quite nascent. Remember, Australian pension funds really started to sort of come into existence in the 80s as part of the creation and the sacrifice of salaries in a high inflation environment to really try and achieve dignity and retirement. The fund was, by today's standards, relatively small, really early in terms of the sophistication of the investments a lot of outsourced models. early in terms of the regulatory oversight because they weren't significant financial organisations at the time. They were relatively modest and relatively low risk. So I was there to sort of watch how the system has evolved since then. Back then, the fund that I worked for, they offered to find benefit only for white-collar workers. Blue-collar workers had much different insurance, much lower contributions and very different terms. So I was really thrilled the time that we were there that we”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was a great early insight into some really important leadership learnings and lessons and about how to inspire and motivate people. So I was very fortunate so young in my career to be able to sit in on those sessions. And then eventually had the opportunity to transition into a pension fund on the corporate finance side. Did that for a couple of years running an accounting team until I had this incredible sponsor who I was interacting with? She was the CEO at the time and she saw my skill sets and saw the possibilities well before I did and had me on the shoulder and said, look, you seem to be really good at maths. Have you ever thought about investing? And it's funny, I'd studied economics, obviously, and finance, but hadn't really thought about investment markets directly. And at that moment, sort of thought, oh, actually, that looks really interesting. And once they're really loved it and I think found my passion for the rest of the...”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Had a bit of a wayward journey to finance. When I left school, I actually thought I'd do medicine. So I started out studying biomedical science. But very early into that, I sort of realized that I was really missing the maths and physics and more sort of mathematical ways of applying my skills. So I ended up transitioning into economics and political science, studied that for many years, and graduated into the world. But even then I didn't go straight into finance. I worked for the Treasury Department for a number of years. An interesting working more in sort of the accounting and corporate finance.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Sonia Sotel Rixon, the chief investment officer of Australian superannuation fund HESTA, a $75 billion Aussie dollar pool dedicated to health and community service workers. HESTA services 90,000 employers and a million members, 80% of whom are women. Sonia is one of Australia's biggest stars and employing a total portfolio approach to the management of assets. We discussed this approach in my past conversations with RAF Art from Australia Future Fund and Matt Winere, then CEO of New Zealand Super. Total portfolio approach generally uses more granular risk management and fine-tuning of incremental portfolio decisions than an asset allocation approach. Our conversation highlights the beliefs, benchmarks, culture, and implementation that drives HESTA's total portfolio approach. We also dive into”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source
“Opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of capital allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of capital allocators or podcast guests may maintain positions in securities discussed on this podcast.”
2023-10-09 · Capital Allocators · Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342) · IDENTIFIED FROM THE TRANSCRIPT · source