Aug 27, 2018 · 1h 6m · capital-allocators
Kristian Fok – Australia's CBUS Superannuation CIO (Capital Allocators, EP.66)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Kristian Fok, Chief Investment Officer of Australia's $46 billion CBUS Superannuation, discusses the fund's transition from an outsourced advisory framework to a hybrid internal investment model. He explains how CBUS leverages long-term patient capital, direct real estate development, and a mission-driven culture to optimize net returns for construction workers.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 17.4% of the talking time here. How this is scored →
Ted as informed peer 4.7 Guest teaching 5.4 Guest disagreement 1.3 Ted pushing back 0.2
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 45:28 Rejection of the Impact-Return Tradeoff Premise
Fok directly counters the widespread assumption among institutional peers that pursuing social and sustainable development goals requires sacrificing risk-adjusted investment returns.
Hardest push from Ted ▶ 45:05 Probing Return vs. Job Creation MathTed directly pushes Fok on whether CBUS artificially inflates expected returns on direct property projects by including job creation and future pension contributions in the math.
Biggest teaching moment ▶ 7:20 Explaining the Industrial Origins of Australian SuperannuationFok educates the audience on how the Australian retirement system was built through union-government wage accords, giving beneficiaries deep psychological ownership over their funds.
Ted holds their own ▶ 32:20 Challenging Static Reference Portfolio ConstructionTed demonstrates sharp allocation knowledge by questioning how CBUS establishes a neutral reference portfolio before layering macro scenarios and valuation deviations.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Kristian Fok's Actuarial Background and Early Career | 3 | 6 | 1 | 0 | Ted opens with a simple biographical prompt. Fok provides an in-depth explanation of actuarial mechanics, Australia's historic industrial Accord, and the creation of compulsory superannuation. | |
| Consulting at Frontier and Advising CBUS | 4 | 5 | 1 | 0 | Ted clarifies the institutional governance structure. Fok details consulting under former Reserve Bank governor Bernie Fraser and the fund's initial outsourced model. | |
| Joining CBUS and Initiating Team Capabilities | 4 | 5 | 1 | 0 | Ted tracks the fund's asset growth. Fok explains his transition from asset consultant to internal leader, highlighting fee reduction and internal risk systems. | |
| Active Manager Capacity Limits and CBUS Property | 5 | 6 | 1 | 0 | Ted checks whether CBUS Property is entirely domestic. Fok highlights the structural limits of active external managers and explains the 20% annualized return of their direct property development arm. | |
| Establishing the Hybrid Model and Global Equities | 5 | 6 | 1 | 0 | Ted drills into how long-term philosophies apply to public equities and portfolio sizing. Fok outlines their 40-name Global Quality Strategy and internal breakeven economics. | |
| Attracting Talent, Team Culture, and Social Purpose | 4 | 5 | 1 | 0 | Ted probes how CBUS attracts internal talent despite commercial pay disparities. Fok highlights member alignment, cross-asset collaboration, and economic purpose as competitive advantages. | |
| Portfolio Architecture, Asset Classes, and Scenario Modeling | 6 | 5 | 1 | 0 | Ted presses on portfolio architecture, neutral reference benchmarks, and asset class valuation. Fok explains their scenario-based modeling and cross-asset thematic overlays. | |
| Internal Allocation Strategy and Growth Projections | 5 | 5 | 1 | 0 | Ted asks how CBUS manages private equity and sources managers. Fok shares the trajectory toward 40% internal management and direct construction innovation investments. | |
| Remuneration Strategy and Competitive Landscape in Australia | 5 | 5 | 2 | 1 | Ted asks about bringing in private equity talent and clarifies manager saturation in Australia. Fok notes seeing over 100 domestic managers and shares that his team preferred enriching ordinary Australians over billionaires. | |
| Geographic Exposure and Current Portfolio Composition | 5 | 6 | 2 | 1 | Ted questions whether CBUS counts member job creation into expected investment returns. Fok firmly clarifies that pure risk-adjusted returns come first and that societal impact does not require compromise. | |
| The Evolving Role of the Chief Investment Officer | 4 | 5 | 1 | 0 | Ted asks how Fok allocates his time. Fok describes the CIO role as primarily organizational design, leadership development, and measurable team engagement surveys. | |
| Assessing External Managers and Managing Performance Internally | 6 | 5 | 2 | 1 | Ted challenges Fok on assessing external managers lacking talent development and asks how internal underperformance is handled. Fok stresses full accountability and evaluating manager organizational sustainability. | |
| Long-Term Investment Horizons and Real Asset Megatrends | 5 | 6 | 1 | 0 | Ted asks about duration across asset pools. Fok explains incorporating 20- to 40-year secular megatrends into real asset engineering and long-term public equity corporate underwriting. | |
| Alternative Strategies, Hedge Funds, and Institutional Vision | 5 | 6 | 2 | 0 | Ted inquires about hedge funds and future vision. Fok critiques excessive fee extraction in hedge funds and private equity, setting a long-term goal for CBUS to possess investment banking capabilities with a fiduciary purpose. |
Statements from this episode (19)
Fok: Accumulation and account-based funds do not require actuaries
“Ultimately you don't really need an actuary to run an accumulation or an account-based fund.”
Australian super funds require a two-thirds majority between employers and unions
“So you got to remember that these funds are comprised of both employers and unions, right? And they need two thirds agreement to make anything happen.”
Fok: Internal data systems enable better portfolio decisions than external consultants
“We introduced MSCI Barrow as a risk system that we Incrementally added new data information platforms. We sort of argue that on the basis that it gives us better insights around our own portfolio, which gives us a greater capacity to make informed decisions, f…”
Fok: CBUS saved A$15 million annually by renegotiating external manager fees
“The combination of going in and reducing fees without having to sort of materially change the strategy, plus adding the platform to In terms of information and so forth, allowed us, each time we went back to the board, we said, look, returns are still strong. …”
CBUS operates an in-house, end-to-end property development company
“So we, I think, fairly unique, certainly in Australia, and probably globally, where we have a dedicated property development company that purchases land, gets the design of a building, gets all the pre-lease tenants, builds a building, and then we hold it.”
CBUS's direct property development business averaged over 20% returns for five years
“The last, so the last five years, it's earned on average over 20% per annum, which is just astounding.”
Fok: Large infrastructure managers leave mid-size and greenfield projects unaddressed
“So within infrastructure, for instance, we already have a number of managers that are high quality of global reach, but they're very big. So, they can give us access to the really large deals, and in some cases, I'll source them, and we might actually invest a…”
Fok: Internal management breakeven versus external fund managers is $400M to $500M
“Because no matter what, particularly if it's market driven, you pay them more, right? In our case, we have a relatively fixed cost, and if we double the mandate, then we're not paying that much more. So for us, you know, breakeven relative to a fund manager wa…”
Fok: Institutional asset silos force funds to pay banks to unbundle deals
“Quite often what you do is you pay an investment bank to actually take those opportunities and to structure it and split it out. And then you go ahead and you buy the individual pieces and put it back together again. But the flip side is unless you've got an i…”
CBUS replaced its static long-term model with a cyclical reference portfolio
“We used to have a long-term portfolio, but it was sort of like so long that it didn't capture medium-term trends. So now we have a reference portfolio, and it's designed to take into account particular sort of aspect of the cycle.”
Fok: CBUS targets 35% to 40% internal management within four years
“So in the next four months, and that should bring our internal management up to about 20%. We think ultimately over the next three to four years, it'll probably go up to 35 or 40%.”
Kristian Fok: The private equity fund-of-funds model does not work for CBUS
“So, we have a fund to funds program that was entered into a long time ago, and frankly, that just doesn't work for us.”
Fok: Approximately 100 Australian equity managers compete in an oversupplied market
“In the Australian market, there's like a hundred people trying to sell Aussie equities.”
CBUS focuses on domestic property development to avoid product-constrained overseas markets
“Property at the moment Is almost all domestic. It's unusual that that's the case because we just have this advantage that we can create products, whereas most pension funds here, the products constrained, so they have to go overseas.”
Fok: Approximately 40% of CBUS's total portfolio is invested domestically
“So I think generally speaking, it'd be probably about 40% of the portfolio is still domestically focused.”
CBUS Property's direct investments created 70,000 Australian construction jobs over eight years
“CBUS Property not only has generated those returns, but in the last, I think, eight years, it's created 70,000 jobs in our own industry, which is a really interesting, it's this virtuous circle because we take our members' superannuation money and then a porti…”
CBUS plans concentrated direct stakes and corporate debt financing in Australian equities
“So one of our strategies that we're likely to introduce this year is to actually take more concentrated individual positions in some Australian listed companies with a view to not only just have those positions as an equity holder, but to look at whether we ca…”
Kristian Fok: Only a tiny handful of hedge funds justify their fees
“The fees are so high relative to the returns. You know, I do feel that there's only a very small handful. I believe that really earn those. It's very easy for everyone else to come up and have the same fee scale and not really deliver that value.”