Exclusive interview with Graeme Miller, Partner, Chief Investment Officer, Mercer Super
Global Investment Insights
with Graeme Miller, Partner, Chief Investment Officer, Mercer Super
Graeme Miller is a Partner in Mercer’s investments business, based in Melbourne. In his role as Chief Investment Officer, Mercer Super, he is responsible for the management of Mercer Super’s investment portfolio.
In this exclusive interview with Global Investment Institute, Graeme discusses the current investment landscape, including interest rates, geopolitical volatility and AI enabled technological change. He explains how scale creates both advantages and challenges for superannuation funds, and emphasises why diversification is the cornerstone of risk management, as well as why strong investment governance is fundamental to achieving consistent performance over the long-term. Graeme also shares his views on private markets investing, and discusses the associated challenges around illiquidity and valuation.
Q. How are current market dynamics, from a macroeconomic and geopolitical perspective, shaping the way you invest in opportunities and manage risks?
A. While geopolitical events are likely to continue influencing market movements in the short-term, we think the stronger longer-term drivers of investment returns are likely to be the path of interest rates and the impact of technological change – especially artificial intelligence. The current consensus view appears to be that interest rates will continue to decline and that AI will be the backbone of strong economic growth in the medium and longer term. This view is reflected in the current pricing of listed equities, especially those in the US, which are at all-time highs.
We have been surprised by how resilient economic growth and consumer sentiment have been in light of the US trade tariffs, and we are now of the view that this resilience, along with fiscal support and a benign interest rate environment may well continue to support current equity pricing.
Consequently, our equity exposures are positioned close to their long term targets.
Q. What are your thoughts on the growing scale of superannuation funds and the advantages and challenges it creates in deploying capital and the ability to access opportunities?
A. Investing is a highly competitive activity, so investors need a competitive advantage to achieve consistent outperformance. I think it’s very important for investors to be honest and articulate about what their sources of competitive advantage and disadvantage are. And then, to ensure that investment strategies are designed to capitalise on those advantages.
Scale can undoubtedly be a source of competitive advantage. For example, scale allows super funds to invest in resources and systems to carry out research and analysis. It allows funds to build well-diversified portfolios and access opportunities and assets that may not be available to smaller investors. And, of course, scale also typically reduces investment costs and fees.
On the other hand, as organisations grow, increasing size can become a competitive disadvantage, if it is not well-managed. For example, decision-making can become slower and more complicated as an organisation grows. Growth might also lead to an organisation becoming more conservative or less innovative. And growth may also make it difficult to get material exposures to capacity-constrained opportunities.
Q. How are you approaching diversification in today’s environment and how are you incorporating defensiveness and resilience into your portfolios?
A. Having well-diversified portfolios is a cornerstone principle of Mercer Super’s investment philosophy and one of the key tools we use to manage risk. We build robust portfolios that are diversified across (and within) asset classes, industries, countries and fund managers. We aim to ensure that our portfolios derive their returns from many different sources.
This diversification acts as a powerful tool to reduce risk. We also use dynamic asset allocation to make our portfolios more resilient. We started the year with moderately lower than usual exposure to global listed equities in our portfolios, but we have recently moved equities back to their long-term targets. In our most conservative diversified options, we’ve also recently increased exposure to UK sovereign bonds to provide additional portfolio resilience.
Q. How can investment governance be used as a driver of competitive advantage?
A. I like to think about investment governance as being similar to the foundations of a house. While it’s possible to build a house with weak foundations, when the inevitable storm comes along, chances are the house will collapse.
The same applies to investment governance - if an investment process is going to be successful and resilient over the long term, it needs to have solid foundations in the form of strong and sound governance.
I’ve had the privilege of working with many different investors over my career, and when I look at those that have been the most successful on a consistent basis, the one thing they have in common is that they all have outstanding processes and structures in place to make, implement and monitor their investment decisions - in other words, they all have great investment governance.
In short, what this looks like is that decisions are made at the right level in the organisation based on rigorous research and analysis, these decisions are implemented swiftly and accurately, there is strong oversight and accountability of decision-makers and, where necessary, there is also constructive challenge.
Q. As portfolios tilt in favour of private markets, what is your view on allocating to private assets? Do you expect the trend to continue and what risks and opportunities come with pursuing illiquidity and complexity premia?
A. I think that private markets will always have a place in a well-diversified portfolio. After all, most of the world’s assets are privately-owned, and there are many opportunities and industries that can only be accessed privately. Over time, private markets have proven themselves to be both strong drivers of returns and well as effective diversifiers of risk.
I also think that private ownership is likely to be a better model for companies in their growth stages, because it allows them to truly focus on the long term. More recently, the expansion of private debt has allowed investors to participate in investment opportunities that were previously limited to banks.
Of course, investing in private markets can present challenges and introduce new risks into a portfolio. The most obvious one of these is illiquidity, and so it’s important to ensure that private investments offer an appropriate return premium to reflect this illiquidity risk.
We’ve also seen more attention on private market valuations in recent times. I think we’ll continue to see regulatory scrutiny of valuation policies and practices – in fact it wouldn’t surprise me if a new “Chief Valuation Officer” type role emerges at those super funds that invest heavily in private markets.
Graeme Miller, Partner, Chief Investment Officer, Mercer Super
Graeme Miller is a Partner in Mercer’s Investments business, based in Melbourne. In his role as Chief Investment Officer, Mercer Super, he is responsible for the management of Mercer Super’s investment portfolio.
Prior to rejoining Mercer in March 2025, he spent nine years as Chief Investment Officer at TelstraSuper, and 16 years at Willis Towers Watson, where he led the Australian investment practice. He commenced his career at Mercer in Melbourne in 1990 as a graduate actuarial analyst.
Graeme holds a Bachelor of Economics (Finance and Statistics) from Monash University, is a Fellow of the Institute of Actuaries of Australia, a Certified Investment Management Analyst, and a Graduate Member of the Australian Institute of Company Directors.
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