Russell Investments Master Trust adds Nationwide Super

Newcastle-based small-business super fund Nationwide last week became the latest micro-fund to roll into the Russell Investments “superannuation alliance”.

Under the new master trust arrangement, expected to be completed by late 2018, Nationwide will maintain its own brand, while Russell Investments manages all components of the fund.

“We are very excited for Nationwide to join the superannuation alliance and look forward to supporting their growth plans,” Russell Investments managing director for Australian institutional business, Jodie Hampshire, said. “Nationwide already plays an important role in supporting Australian small business, and we are incredibly proud to enable them to continue to focus on this important mission.”

The tie-up brings the funds under management within Russell Investments’ alliance to more than $9 billion, managed on behalf of more than 105,000 members.

Nationwide Super chair Kim McHugh said the board’s view was that the fund could still add value for members by maintaining a separate brand.

“Our absolute priority remains helping small businesses and their employees,” McHugh said. “Super creates administration and compliance pressure for small business that simply isn’t acknowledged or addressed by many larger funds. We were looking for a partner that would take the time to understand our members and employers − and help shape our offer to even better meet their needs.”

In addition to scale benefits, Russell Investments’ superannuation alliance model allows independent funds the flexibility to choose which functions to outsource, insource or co-deliver. It also offers partners the option of retaining preferred vendors and service providers.

McHugh said the Nationwide board was attracted to this flexibility, under which the fund can retain its underlying administrator, Link Super, and its insurer, CommInsure.

Hampshire said the Russell model provided a flexible alternative to basic mergers that enables niche superannuation brands to differentiate, compete and grow amidst fund consolidation.

Under pressure

Nationwide has been under increasing pressure from fund outflows for a number of years.

“It’s no secret that industry pressures are forcing consolidation, and will continue to for some time,” Hampshire said. “Our alliance offers a way for independent superannuation funds to grow and sustainably evolve – a real alternative to the vanilla merger.”

Russell Investments is seeking to attract other niche funds to join its master trust, to leverage its economies of scale and better compete.

“I see a world where consolidation has the potential to over-commoditise super, whereas we know that many members appreciate the differentiation in their funds’ value proposition,” Hampshire said. “I believe we will see a renaissance of the independent fund, as they discover economic models that allow them to compete and genuinely differentiate their service delivery for the benefit of their target market and membership.”

The Nationwide deal comes a year after the Nestlé Australia Group Superannuation Fund merged into Russell Investments Master Trust, adding almost $800 million in assets and 5000 members, in March 2017.

Head of Russell Investments Master Trust and Superannuation, Tim Furlan, said that tie-up came after the Australian Prudential Regulation Authority gave the corporate fund a nudge to find a merger partner.

“Nestlé joined the trust due to the pressure from APRA for funds to merge, [as the regulator] is looking for efficiency, and the fees are lower with us; also they didn’t have their own My Super products, so it was an opportunity for them,” Furlan said.

Russell Investments Master Trust was a finalist at the Conexus Financial Superannuation Awards 2018 in two categories: Best Technology Offering, and Innovation and Transformation.

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