The Australian investment management landscape has experienced a decade of profound transformation. With total superannuation assets passing $4 trillion in 2024, the industry has evolved into a sophisticated ecosystem of technologically advanced institutional investors competing on the global stage.
Three macro trends have fundamentally reshaped how Australian superannuation funds operate, invest, and position themselves for the future – internalisation, digital transformation and internationalisation. Understanding these trends and their operational implications is crucial for investment operation leaders navigating an increasingly complex environment.
We can trace the start of the internalisation trend to 2015 when AustralianSuper committed to bringing 50% of its total assets in-house. This was a declaration that Australian superannuation funds had reached the scale necessary to compete with the world's largest asset managers on their own terms.
The economics are compelling. AustralianSuper estimates it has saved as much as $1 billion in fees over the past decade by bringing investment management in-house (Investment Magazine). For funds with hundreds of billions in assets, even modest fee reductions translate to significant member value.
The trend has accelerated across the industry. AustralianSuper held 75% of its investments directly as at 30 June 2023, with other industry funds, including HESTA and UniSuper, also holding over 75% of their assets directly (Super Review).
However, successful internalisation demands more than just hiring investment professionals. It requires a complete reimagining of operational infrastructure. Moving from external mandates to internal management requires centralised data aggregation systems capable of handling multiple asset classes, currencies, and time zones. Legacy spreadsheet-based processes quickly become inadequate when managing complex portfolios internally.
The operational complexity can be substantial, as internal investment teams require access to clean, validated data from multiple sources: market data vendors, custodians, prime brokerages, and alternative investment platforms. This creates demand for centralised operational data stores that can serve as the trusted source of truth across all investment activities, supporting everything from portfolio construction to risk reporting and regulatory compliance.
Many funds discovered that their legacy systems, which were adequate for monitoring external mandates, were inadequate for supporting internal investment teams. The result has been a surge in demand for sophisticated data management infrastructure capable of supporting complex, real-time investment operations.
The migration from legacy systems represents more than technological modernisation, it's a fundamental reimagining of how investment operations function. The catalyst has been the operational complexity of larger, more sophisticated portfolios combined with regulatory demands for greater transparency and control.
From AlphaCert's observations in the market, the transformation has been driven by several factors: the inadequacy of spreadsheet-based processes for complex operations, the need for real-time data access across global operations, and increasingly sophisticated regulatory requirements that demand comprehensive audit trails and data governance.
Cloud infrastructure has become the foundation for modern investment operations, offering the scalability required to accommodate rapid asset growth and the security frameworks demanded by institutional governance standards. Modern platforms provide the real-time data access that global operations require, automated validation processes that reduce operational risk, and seamless integration with the expanding ecosystem of financial data providers.
The transformation has been particularly crucial for superannuation funds pursuing internalisation strategies. Internal management requires sophisticated data governance frameworks that can handle the complexity of direct investment operations whilst maintaining the operational efficiency that large funds require. Automated reconciliation processes have replaced manual spreadsheet-based workflows, dramatically reducing operational risk whilst improving data quality and timeliness.
Integration capabilities have become critical as funds now work with dozens of data providers, custodians, and service providers across multiple jurisdictions. The ability to seamlessly integrate data from these diverse sources into a unified operational data framework determines whether funds can successfully scale their operations or remain constrained by manual processes and operational bottlenecks.
The third transformative trend reflects a mathematical reality: Australian superannuation funds have outgrown the domestic market. With assets exceeding $4 trillion, offshore expansion has become essential for diversification and return generation opportunities unavailable in the Australian market alone.
According to the 2023 NAB Super Insights Report, offshore investment allocation of investment portfolios is approaching 50% with large funds leading the trend. The NAB Report also showed superannuation funds were favouring unlisted international infrastructure and unlisted property.
This expansion adds to the operational complexity that superannuation funds must manage. Multi-currency operations require sophisticated systems capable of handling foreign exchange exposure, international settlement cycles, and complex tax and regulatory obligations across multiple jurisdictions. Time zone management has become a critical operational capability, with funds maintaining international offices to ensure continuous portfolio monitoring and risk management.
Regulatory compliance has become increasingly complex with international expansion. Superannuation funds must navigate Foreign Account Tax Compliance Act (FATCA) reporting requirements, the ATO's Common Reporting Standards (CRS), anti-money laundering obligations, and jurisdiction-specific regulatory frameworks. Each market brings its own data standards, reporting requirements, and operational conventions that must be integrated into the fund's global operational framework.
The data management challenges of internationalisation are substantial. Global operations require consistent data standards across international offices, integration with global custodians and service providers, and the ability to aggregate and reconcile data from diverse international sources. Alternative investments such as private equity, infrastructure, real estate often come with complex data structures and irregular reporting cycles that traditional systems struggle to accommodate.
International expansion has also driven demand for more sophisticated operational data stores. Superannuation funds need systems capable of supporting global investment teams with consistent, real-time access to portfolio data regardless of location. This requires robust data governance frameworks that can maintain data quality and consistency across multiple time zones, currencies, and regulatory environments.
The funds that successfully navigate these trends share common characteristics:
The divide between leaders and followers continues to widen. Funds with robust operational infrastructure and data platforms can pursue sophisticated strategies, expand into new markets, and respond quickly to changing conditions. Funds constrained by legacy systems and manual processes find themselves increasingly limited in their strategic options.
As the Australian superannuation system continues to grow, these operational capabilities will become increasingly critical differentiators. The superannuation funds that can effectively manage complexity whilst maintaining efficiency will be positioned to deliver superior member outcomes in an increasingly competitive and globalised investment landscape.
The question for superannuation fund leaders isn't whether these trends will continue, the mathematics of scale and the demands of diversification make their progression inevitable. The question is whether their operational infrastructure and data platforms can support the complexity these trends demand whilst maintaining the efficiency their members expect.
At AlphaCert, we empower superannuation funds and institutional investors with a robust data management platform designed to meet the challenges of internalisation, digital transformation, and global expansion. With our secure, scalable and cloud-based solution, you gain a single source of truth for your investment data, enabling better governance, operational efficiency, and confident decision-making. Learn how AlphaCert can transform your investment operations.