Why ACC investment chief believes CIOs should stay hands-on with portfolios

Day-to-day portfolio management is increasingly a luxury for chief investment officers, particularly at large asset owners where the role is evolving into one centred on people management. But David Iverson, CIO of New Zealand sovereign investor the Accident Compensation Corporation, argues CIOs should remain firmly on the tools when it comes to managing portfolios.

Iverson, who oversees the NZ$51 billion ($30 billion) fund that invests to offset New Zealand’s national insurance liabilities, says he sees his role as a “multi-asset portfolio manager” who owns the risk and investment decisions across the portfolio.

ACC has a 70-person-strong investment team, of which over half are front office, and manages 80 per cent of its assets internally.

“Essentially what is actually happening is I own all the exposures – listed, unlisted, the benchmark decision – even though they might be approved by the board, which it is,” he tells Top1000funds.com in an interview.

“Then from that perspective, all the exposures are mine to own and therefore need to be parcelled out, and then I have to sit right across the portfolio.

“There needs to be someone who ultimately owns the whole thing, and the default [responsible party] you would think is the board – I don’t think it’s the board. The board at the end of the day sets the structure up to get the job done, but it’s delegating and reviewing, not the doing. The doing happens elsewhere.”

Before joining ACC in 2021, Iverson spent over a decade at New Zealand Super Fund and led the build-out of its renowned value-add strategic tilting program as its head of asset allocation. It was a period that shaped Iverson’s investment philosophy as he learned to grapple with an “asset class agnostic” investment approach.

Under NZ Super’s total portfolio approach, the fund’s investment team is encouraged to chase deployment opportunities even if they don’t fit neatly into traditional asset class buckets, but it created a complexity where mandates for the internal team became less defined.  

“Investment professionals need clarity around what is their domain expertise, where are they hunting, what are they expected to produce, how much does it cost you, and that’s usually what you do through traditional mandates,” Iverson says.

“I’ve learned since then is having a defined, clear mandate is very important, and I think if you’re worried about things slipping between buckets, that’s an easier solve.”

ACC’s approach in determining who “owns” the responsibility for cross-asset-class opportunities is two-pronged. One option is for the CIO to “own” opportunities and investments that fall outside asset class buckets – or any significant investment decision – through their own book; the other is for the fund to create a dedicated investment bucket that group these assets together.

One such bucket is the “incubator” sleeve where the fund trials out “innovative” ideas and it currently allocates “a few million” of assets here. It is also a place where ACC experiments with different ways of managing assets; for example, running longer-horizon global equities strategies in-house rather than through external managers.

“It’s trialling that to, one, assess does the strategy have legs; two, how much does it cost to run it; and three, is it feasible to scale up,” Iverson says.

“I’d rather trial it, see what we didn’t know and see if it works, rather than throwing a lot of money in it, find out it’s wrong, and then you’ve got to undo it.”

DAA journey

Iverson joined ACC in 2021 as its head of dynamic asset allocation and, equipped with his experience from NZ Super, built the program at ACC around three central pillars: a solid belief set, a long horizon view of returns, and good governance. All three are critical for a fund to remain cool-headed during period of underperformance, Iverson says.

“You have to be able to live through the pain, which is inevitable, and to be able to handle that,” he says.

The program is primarily driven by fair value assessment around equities, fixed income and currencies, with an ex-post information ratio of around 0.7, Iverson says.

It has a return-seeking objective primarily, working with the fund’s five sets of liabilities and asset allocations from different insurance client pools. The underlying portfolio construction logic for every pool is that the fund will compose a portfolio that best matches the liabilities, which means there tends to be a large exposure to bonds, particularly inflation linked. “Then we mismatch by introducing equity exposure,” Iverson says.

“Now that builds the policy portfolio for every account, and then everything else we do, DAA included, is nothing more than an alpha source.

“The thing about alpha in an asset-liability framework is the returns come through with very little net-asset liability risk. If I could just get the minimum risk portfolio plus alpha, that’d be great. But I don’t think the returns are high enough, so that’s why your equity is there.

“I know, particularly in other markets, they refer to DAA as risk-enhancing or risk-reducing. I don’t do that. It may be [risk-reducing], but that’s not how we build a portfolio.”

DAA is an exercise that “holds your feet close to the fire” as an investor may have to deploy when common sense of investing is telling them not to. One example is during the COVID pandemic when the global stock market nosedived more than 30 per cent yet DAA investors have to deploy through the storm.

“Some people thought the world was going to implode, and you’re still deploying risk, losing money while you’re doing it, at least in the equity space,” Iverson says.

“You have to calibrate the system so you know how much to spend. If [an asset] is 50 per cent cheap, how much do you deploy; if it’s 100 per cent that’s twice as expensive, how much money do you deploy. That component of spending risk or risk deploying capital is what makes the program reasonably systematic in nature,” he says.

“There’s a lot of noise in markets, there’s a little bit of information, and a lot of the time it’s a lot of noise. So when you’re deploying risk, you can always outguess yourself… that’s why the systematic nature of the program is to really ensure that you’re spending the risk.”

As at the end of June 2025, over half (60 per cent) of the ACC portfolio is New Zealand bonds and inflation linked bonds, followed by 17 per cent in global equities, 8 per cent in New Zealand equities and 5 per cent in private markets.