Conexus will apply its events management expertise and experience to enhance existing WPF events – three offshore and one domestic event for US-based institutional investors.

It will also create an online community to facilitate ongoing communication and engagement for conference audiences.

The World Pension Forum, founded 20 years ago by Philip Schaefer, boasts a strong track record of attracting chief investment officers, board chairs, trustees, fund chief executives and senior investment decision makers to its events. Schaefer will remain as president of the expanded business.

In a statement Conexus co-founder and chief executive Colin Tate said that both he and Schaefer believe that “challenging long-term institutional investors to think differently and encouraging them to engage globally has the power to make a difference in the world”.

He said that WPF events “help investors connect the dots between their fiduciary responsibility, member returns and risk management for the ultimate betterment of retirees. It will also provide a platform to work with policy makers on addressing the world’s urgent fiscal, environmental and social issues”.

Stephen Kotkin, professor at the Woodrow Wilson School for Public and International Affairs at Princeton University and WPF scholar-in-residence, will continue to be responsible for programming and managing all speakers and content at WPF events.

A statement from WPF and Conexus Financial sets out further details of the partnership.

It is an arrangement that precedes the formation of First Super in 2008. Back then, they shared the chair at the Timber Industry Super Scheme, one of three funds – along with the Furniture Industry Retirement Superannuation Trust (FIRST) and the Pulp and Paper Workers’ Superannuation Fund (PPWSF) – which merged to form the larger First Super.

“For us, we believe that the co-chair arrangement works much better as a governance control,” says Stewart. “It provides a much more robust system between management and the board. Because we believe that we need chairs and board members who are dedicated to the industries the membership comes from, the governance is directly related to the link which created us. Many of us have been in our industries for 40 years, so when we go to the sites we know the employers and the members and even their families really well.”

Good governance

Today, First Super is a $1.8-billion fund with around 72,000 members – 50 per cent of whom are active contributors – and 4000 contributing employers. There are five different investment options but 95 per cent of the membership – and 87 per cent of funds under management – is in the default fund, the balanced option.

In addition to a co-chair arrangement, the other feature of First Super’s governance is the tradition for the one independent director to chair the audit, compliance, remuneration and nomination committees.

O’Connor says that while he wouldn’t recommend this arrangement as the solution for every fund, it has worked well for First Super. “For us it has delivered value, some independence and also accountability,” he says. “It suits us and has given us a governance regime and a structure which the membership can understand and trust.

“Of course there’s no one perfect model or one-size-fits-all and you need to pick one which one suits your board, and we do continually review our structure and ask ourselves if it’s working, and if we have the right things in place – not just the structure but the personalities – to make sure we are on top of what is happening in the industry super world at the time.”

Not just account numbers

While it’s an open-offer super fund, First Super stays very close to its roots in the union movement and the industries that came together to form the fund. As a result, O’Connor says the fund reflects the attributes of its membership.

“We’ve got our sleeves rolled up, we’re in there working hard doing an honest day’s work for our members,” he says. “As far as my role is concerned, when I go to a work site and the returns aren’t good, the membership let me know – I can assure you.”

O’Connor says that with First Super there are only three degrees of separation. “Somebody knows somebody who knows a director, so it’s very personal,” he says. “These are real people we are dealing with all the time – they are not just account numbers.”

Members’ First

This sense of shared purpose, he says, was very much behind the fund’s recent decision to exit its $7-million investment in News Corporation due to concerns about the multinational media company’s governance.

First Super, along with a number of other funds mobilised by the Australian Council of Superannuation Investors (ACSI), supported a motion to split the chief executive and chairman roles held by Rupert Murdoch. The News Corp chief used the voting power of his shares to defeat the motion, and as a direct consequence First Super has become the first fund to “vote with its feet” and exit the company.

“It wasn’t just our blue collar members supporting this,” says O’Connor. “Our employer representatives did too. They have either run their own businesses or been involved management and they have very strong opinions on what responsible employers should or shouldn’t do. So we have a common set of values in our fund, and I think our members expect us to be quite aggressive about protecting interests, and I don’t think they expect us to be passive about it at all.”

Size is no barrier

First Super was also a prime mover among funds in applying for a MySuper product, with the application lodged early on January 2, the first day applications opened.

“As a low-cost fund for working people, we completely support MySuper and it just sends a good signal to our membership for us to be in there really early with an application,” says O’Connor.

“The product itself is pretty much indistinguishable from our existing default fund, but accreditation and having that MySuper boxed ticked early are really important to us.”

It also plays to a recurring theme at First Super: size is no barrier. “It’s certainly been a challenging process, but First Super has shown once again that small funds are just as capable as larger ones of meeting enhanced compliance requirements in a short time frame,” says Stewart.

Other initiatives that belie First Super’s relatively small size were early moves into low-cost financial advice, allocated pensions and business and personal loans. All this has been accomplished by a fund that has only four full-time employees and no chief investment officer.

Assets at First

Chief executive Graeme Russell – soon to take the CEO job at Media Super – has played a major role on the investment committee, which is advised by Frontier Advisors, with major mandates to Industry Funds Management, property investor ISPT and fund manager Allan Gray, formerly Orbis Investment Management. “We really like the collaborative investment vehicles such as IFM and ISPT,” O’Connor says. “For us, they are excellent vehicles to invest in and we also wholeheartedly support the basic concept of collaborative investment with other industry funds, because it is low-cost, accountable to us, and aligned with our values.

“The other relationships, such as Frontier and Allan Gray, we are also very happy with – we’ve been able to work with them and reach an understanding which we think has delivered some good results.”

The target return for the balanced default fund is CPI plus 3.5 per cent over a rolling five-year period, and over the last five years the fund has delivered 2 per cent growth. One-year performance is significantly better – at 6.7 per cent – while the 10-year performance is 5 per cent.

“I think we have fared reasonably well in the tough market,” says O’Connor. “It reflects our membership, but we have been more defensive in recent years – we used to be 70-per-cent growth and 30-percent defensive but now we are at 60:40. As we’ve done that we’ve gone into some different asset classes, diversifying into credit, for example.”

In the balanced portfolio, target allocations are 24 per cent for Australian equities, 18 per cent international equities while – reflecting the more defensive nature of the fund – 28 per cent is in fixed interest and 10 per cent in property.

“We try and explain to people that there are other options in the fund and they can mix and match if they want to, but in reality there is very little uptake – some members like to be more engaged but the majority of our members take the view that its our job to look after their money, so they like to put it right back on us,” explains O’Connor.

Accountability and motivation

This theme of accountability is one reason behind First Super’s wariness of further mergers. Both O’Connor and Stewart take the view that the 2008 merger brought together complimentary industry groups and delivered a fund which was small enough to be connected to its membership, and big enough to gain some modest economies of scale.

“You’d never say never about another merger because it’s all about the members’ interests, but we think we’ve got it pretty much right at the moment,” says O’Connor. “Our people are battlers. They were the ones out fighting the fires over Christmas and New Year. If that can’t motivate you as a trustee to do the right thing for their retirement savings, then nothing will.”

imCIOS will look at the investment allocations, teams, outlook and decision-making of Australia’s institutional investors. It will be the basis of an ongoing analysis of this sector, measuring the sentiment, investment outlook and behaviours of these investors.

To achieve this, we need your input. We ask that you, as an institutional investment decision-maker, complete the survey that will drive insights into the investment thinking in Australia.

Recently www.top1000funds.com, also published by Conexus Financial, teamed with investment management consultants, Casey Quirk, to measure the sentiment of asset owner-investment teams around the globe. You may have participated in that already. The results will be combined and contrasted with imCIOS to create a unique perspective on the global fiduciary investment sector.

By completing imCIOS, you will be eligible to receive the summary report that will detail its results.

Participate in imCIOS by clicking here.

The Investment Magazine Chief Investment Officer Survey closes on Monday November 19, 2012.

A: It was feedback from the industry. A number of submissions argued that this proposal was unnecessarily restrictive and could result in higher insurance costs for some superannuation members. Having considered this feedback and our objectives in originally proposing this restriction, we will change the standard. Registrable superannuation entity (RSE) licensees will not be restricted to only seek income-protection insurance from life insurers. The standard will be adjusted to reflect this position. APRA’s objective in developing the standard is to ensure that trustees understand the risks associated with different insurance providers and to support the proposed legislative restrictions on self-insurance announced by the government. Our initial approach was probably prescriptive then, but I believe it is possible to achieve the appropriate outcome by amending our approach. The standard will require that RSE licensees should look at all aspects of insurance arrangements when selecting an insurer, and not just the level of insurance premiums.

A: Poor data quality is a major risk. This is a risk for both the insurer and the super fund. APRA supervises both industries and is not taking sides between funds and insurance companies. However, APRA will look after the interests of fund members who are entitled to payment of claims, and both industries need to raise their standards. For the insurer, it is essential that it does appropriate due diligence on data quality provided by a super fund. Mispricing group-life insurance can be very costly for an insurer, particularly as funds have become much larger. Mispricing of risk by an insurer when tendering for the business of a large super fund is a significant issue. There are also risks to the funds. It may be that premiums are raised to cover the risks associated with potentially poor quality-claims data. Alternatively, funds may find that members do not receive the benefits the fund expected them to receive. High quality data will likely lead to better underwriting, more appropriate pricing and better insurance for members.

A: There are a few concerns at this early stage. Some licensees do not seem yet to have actively engaged in considering what may be required for authorisation or provided the level of resources necessary to drive the substantial change process. A few trustees have given an indication that they will plan to offer a MySuper product, but have not yet considered the important element of developing a risk appetite for offering such a product. Also, there is probably too much focus on the methodology for calculating an operational-risk financial requirement and too little focus on the purpose.

A: We received 35 submissions. The feedback was generally positive. I am pleased that the industry is embracing the enhanced supervisory structure for the industry. It was a good process from APRA’s point of view and there was good engagement with the industry. There was also a reasonable industry consensus on what was good and what was not. A consistent view from industry helps the process.

McCredden took time out from the recent Fund Executives Association Limited (FEAL) national conference to share his experience of leadership gained from more than 30 years in the industry with Investment Magazine Online.

“We have been on a process of more empowerment, seeking others in the organisation to look for ways to innovate,” he told IMO.

“It is part of our organisation’s values, and it doesn’t mean coming up with major new software or something like that but innovation on everyday issues.”

McCredden joined UniSuper in 2008 after more than 17 years heading up Telstra Super.

The recipient of the 2011 Fund Executive of the Year Award, he detailed insights from his recent participation in London Business School’s acclaimed Proteus leadership program.

Attendees in the course participated in a range of activities including life drawing and attending an underprivileged inner-city school.

McCreddden told the conference that the experience had motivated him to seek opportunities to work with school children facing similar challenges when he eventually retires from the industry.

See more of the exclusive interview here:

In the past 25 years the secondary market for private equity has evolved from one in which investors

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Catholic Super’s incoming head of sustainability, who has recently been hired from a global role with Mercer in London, will design and implement a whole-of-fund sustainable investment program for the $4.1 billion fund.
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