Super Review - August

T H E L E A D I N G I N D E P E N D E N T J O U R N A L FO R T H E S U P E R A N N U AT I O N A N D I N S T I T U T I O N A L F U N D S M A N A G E M E N T I N D U S T RY AUGUST 2010

Volume 24 - Issue 7

Retail brands top ratings 11 FEDERAL ELECTION A whole new ball game

The big retail brand names have emerged to dominate the top-rated products in the latest Heron Quality Star Ratings, reflecting their better investment performance in recovering equity markets.

I 12 VALUE FOR MONEY The legal risk of performance fees

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Better safe than sorry

18 MASTER TRUSTS The post-GFC dynamic For the latest news, visit superreview.com.au MANDATES

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its top five-star rating denoting ‘outstanding quality’, while 25 corporate products gained a five-star rating along with 41 pension products.

By comparison, just three ERFs earned the five-star rating: Ausfund, ISPF ERF and SuperTrace.

While industry funds failed to be ranked as top-rated products, they were well represented in the five-star categories, representing 19 of the 54 products.

Not surprisingly, the industry funds were not so well represented with respect to the outstanding corporate superannuation products, filling just nine of the five-star rated slots, while where pension products were concerned, industry funds made up 15 of the 41 products to gain the top ranking.

Butler said the assessment of retail and corporate superannuation products undertaken by the company covered about 130 key product features grouped under areas of importance, including investment arrangements, insurance, contributions, ancillary benefits and communications.

He said investment and insurance had the greatest

ndustry funds have found themselves left out of the list of top-ranked superannuation funds in the latest Heron Quality Ratings.

The ratings, released this month, reveal the Aviva – Navigator Personal Retirement Plan as the top-rated offering in the personal products category, with ING Corporate Super leading with respect to corporate products, AMP SignatureSuper topping the list of pension products and AUSfund once again being named the bestregarded eligible rollover fund (ERF).

The Heron Quality Ratings represent an assessment of 260 products on offer across the various categories in Australia.

Commenting on the findings, Heron Partnership managing director Chris Butler said it was the first occasion on which Aviva’s Navigator Personal Retirement Plan had been crowned as the toprated personal product, while ING Corporate Super had been named the top-rated corporate product on eight occasions.

The Heron process found 54 products in the personal/retail category warranting 3

EDITORIAL

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Chris Butler

Heron’s Top Rated Superannuation Products for 2010/11 Top Rated Personal Product

Aviva - Navigator Personal Retirement Plan

Top Rated Corporate Product

ING Corporate Super

Top Rated Pension Product

AMP SignatureSuper

Top Rated Eligible Rollover Fund

Australia’s Unclaimed Super Fund (AUSfund)

While industry funds failed to be ranked as top-rated products, they were well represented in the five-star categories.

impact on a product’s score, with respective weightings of 55 per cent and 30 per cent.

Pension products were reviewed with respect to each product’s investment arrangements, pension payment frequency, payment methods, options available with respect to the nomination of beneficiaries, options for payment of a death benefit, communication events with members and any ancillary benefits. SR

MASTER TRUSTS

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Mandates Recieved by Balanced Equity Management, Greencape Capital, Hyperion Asset Management, JF Capital, Legg Mason.

Plum Financial Services Russell Investments Plum Financial Services Omega Global Investors Omega Global Investors Mercer Mercer Palisade

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Type of mandate Australian equities

Issued by ESI Super

Amount N/A

Corporate super Corporate super Corporate super Global bonds Global corporate bonds Investment consulting Administration Discretionary

BNP Paribas Amcor BP Super Medibank Telstra Super Nationwide Media Super N/A

N/A $850 million $470 million $50 million $80 million N/A N/A N/A

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DST welcomes SuperStream recommendations

By Chris Kennedy DST Global Solutions has reaffirmed its support for Cooper Review recommendations around the use of technology to streamline back-office systems.

The case for investing in upgraded systems to take full advantage of straight-throughprocessing as defined by the Cooper Review is overwhelming, DST said.

“There is no legitimate reason

why the superannuation industry cannot undergo the same revolution that the banking sector experienced with the introduction of Internet banking,” according to Martin Spedding, executive director, DST Global Solutions Bluedoor.

“We have clients implementing a single technology framework, removing multiple systems from their technology environments. In return, they

are able to greatly reduce their administration costs within a short timeframe,” he said.

The goal for superannuation providers should be not just to reduce costs but to advance wealth management products, according to DST. “These improvements in efficiency have enabled our clients to focus on improvements to customer service and product innovation and, in some cases, roll out new, award-winning

products to market such as investment guarantees and lifetime pensions that deal with longevity risk,” Spedding said.

Most of the systems still in use were designed well before current technology was available, according to Mark Cassar, executive director for the development of the company’s Bluedoor wealth management solution.

Electronic data transmission and processing of contributions

and rollovers, and automated payment and receipting processes, are crucial to improving efficiency, he said.

“Our open, single-technology framework is now being deployed in superannuation funds and wealth management organisations. Superannuation is mandatory and we believe it [should be] administered and managed in accordance with world best practices,” Cassar said. SR

Did self-interest motivate Cooper on SMSFs? AN analysis of the Cooper Review final report recommendations by actuarial firm Rice Warner has suggested that its light-handed approach to self-managed superannuation funds (SMSFs) was owed to the fact that a number of the Cooper Review panel members, including the chairman, Jeremy Cooper, control SMSFs in their own right.

The analysis, published this week, suggested that in taking this “light handed” approach, the panel overlooked the fact that many SMSFs are sub-scale and have undiversified investment portfolios.

Elsewhere in the analysis, Rice Warner also suggested that the Cooper Review has over-estimated the savings that can be achieved from implementing its recommendations and

suggested that the central element of the report, MySuper, was “overengineered and costly”.

“The light treatment of the SMSF segment is incongruous given the heavyhanded approach to APRA-approved funds,” the Rice Warner analysis said.

“While the review is obsessed with ensuring that members are provided with good value, they appear to have reasoned that people setting up a SMSF are capable of taking care of their own arrangements and need little protection.”

However, it added, “yet, we know that at least one-third of SMSF funds are subscale and most members have undiversified investment portfolios – with no requirement to seek advice or provide a formal structured investment strategy”.

The analysis went on to point out that for several years, there had been concern within the industry that many Australians were attracted to setting up a SMSF “even where it is not the optimum outcome for their superannuation”.

“Whilst the review has recommended training for trustees, the continued lack of integration with APRA rules will create an arbitrage opportunity for institutions and intermediaries to promote SMSF structures for those members with the most at stake – those with high balances,” it said.

Rice Warner is recommending that before the Government moves to implement any of the Cooper Review recommendations it consult widely with the industry. SR

Canberra needs to help on underinsurance THE Government needs to become involved in promoting and solving the underinsurance problem in Australia, according to AIA chief distribution officer Damien Mu. Mu said that while super funds, planners and insurance companies could continue to promote and deliver life insurance products to their clients, the Government needs to play an important “overarching role” in promoting the need for insurance, as well as conducting reviews of the ef-

Damien Mu

ficiency of the insurance system.

“That would resonate really positively with the Australian public, when tradi-

tionally the [public] view of life insurance companies has not been positive,” Mu said.

The awareness and understanding of insurance isn’t as strong as it should be, and instances of the family breadwinner dying or becoming incapacitated without leaving insurance isn’t publicised enough, Mu said.

However, Mu warned that while the structure of fees and commissions needed to be reviewed, the Government shouldn’t throw it all away or it would risk exacerbating the issue

of underinsurance.

“There is a cost to distributing that life insurance product, and we need to be able to fund that in some way. Whether it be for the adviser, or whether it be for the super fund, there needs to be a conversation [there],” he said.

“It might not be a commission, but there has to be some sort of fee in there to cover those costs,” he added.

Mu also called on the insurance companies to develop products that were more relevant to the public. SR

Chris Bowen

Govt takes next step on CIVs THE Federal Government has taken the step beyond its broad-brush Budget endorsement of an investment management regime (IMR) by asking the Board of Taxation to consider the underlying design.

The move was confirmed by the minister for Financial Services, Chris Bowen, and the Assistant Treasurer, Senator Nick Sherry, who said the Board of Taxation had been asked to review the Australian and foreign income aspects of an IMR as part of a broader review of collective investment vehicles (CIVs).

The two ministers said an IMR would provide a set of clear and comprehensive rules on the taxation of certain non-resident investments into Australian and offshore assets.

It was intended that the IMR would extend beyond funds management to cover a range of other activities in the financial sector.

Commenting on the move, Bowen said the establishment of an IMR would help grow the Australian financial services sector, creating employment opportunities.

He said the reform was expected to encourage offshore investors, fund managers and other financial institutions to invest and manage offshore capital.

The terms of reference handed to the Board of Taxation include reporting on the tax treatment of CIVs having regard to the managed investment trust tax framework and whether a broader range of tax flow-through CIVs such as corporate CIVs should be permitted. SR AUGUST 2010

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Help offered to accountants without an AFSL AN accountancy group has established a specialist self-managed superannuation fund (SMSF) business to help its colleagues deal with the removal of the accountants’ exemption on providing advice with respect to SMSFs. The group, Exclusively Super Uncompromised, says it will be offering two levels of service – the opportunity for affected accountants to become authorised

representatives using their financial services licence and access to a range of SMSF process products and information.

One of the group’s funders, SMSF specialist and chartered accountant Carolyn Baker, said the Government’s new legislation meant accountants would no longer be able to recommend clients establish, join, acquire or dispose of an interest in a SMSF unless they have an Australian

Financial Services Licence (AFSL).

“This is why we have established Exclusively Super Uncompromised – to provide accountants with alternatives so they can continue to help their clients with SMSF matters without the significant investment in establishing an AFSL,” she said.

“Most accountants would simply be forced to drop their SMSF work because

REST finishes in double digits RETAIL industry fund REST has declared double digit financial year returns for members of its Core Strategy and Pension options.

The fund’s chief executive, Damien Hill, said REST had delivered 11.4 per cent for its Core

Strategy and 12.8 per cent for REST Pension members.

He said this translated to a return of 5.52 per cent a year for the Core Strategy over the past five years and 7.04 per cent a year for the past 10 years. SR

Prime Super begins tender process for admin providers Damien Hill

Macquarie top dog in alternatives GLOBAL pension funds are showing a continued interest in alternative investments, but data released

by Towers Watson this week suggests the funds are being more selective in their allocations.

The research revealed that almost half of the assets managed by the major alternative investment managers were managed on behalf of pension funds, and that the biggest player was Australian-based Macquarie Group.

The research revealed that Macquarie Group managed US$51.6 billion for pension funds, making it not only the largest infrastructure manager but also the largest manager of alternative investments covered by the Towers

of this substantial investment, which is a real shame as they have in most cases a long and established relationship with their clients in what is a trillion-dollar industry,” Baker said. SR

Watson global survey.

Drilling down to the top Australian alternative managers, the research ranked Macquarie as the leader followed by QIC in 38th place, AMP Capital Investors in 39th place, Industry Funds Management in 43rd place and Dexus Property Group in 54th place.

It is a measure of Macquarie’s exposure as an alternatives manager that it also ranked 55th in the Towers Watson research for its real estate asset class exposure, while Industry Funds Management also gained a double listing, coming in at 77th for its private equity fund of funds exposure. SR

PRIME Super is in the early stages of a competitive tender process for an outsourced administration provider.

Prime’s contract with its current provider, Pillar, doesn’t expire until 2011, according to Prime’s chief executive, Lachlan Baird.

Before that contract expires, Prime will be utilising Pillar to help develop the fund’s intra-fund advice offering on the back of Cooper Review recommendations that default funds offer simple intra-fund advice over the phone.

“Hopefully we’ll be able to offer intra-fund advice over the phone in the next few months,” Baird said.

Through the competitive tender process, Prime is also looking at the next administration

provider being able to help the fund set up a more comprehensive advice offering.

Prime has also recently appointed Industry Fund Financial Planning (IFFP) to provide financial planning services to members and employers, Baird said.

Baird did not rule out a more rounded advice offering, including the provision of online Statements of Advice, further down the track – but he said that was more likely to be stage two of the process of developing an advice offering.

“We want to make sure we’ve got a full financial planning service working and delivering results, then we’ll take the next step in the evolution of the process,” he said. SR

Competition winners BT tops super returns growth list Super Review congratulates the following people for winning a bottle of Tim Adam’s Aberfeldy Shiraz 2000 for completing the Super Review online survey.

• Robyn Lindsay (Consulting) • Jude Quinn (Australian Administration Services) • Cindy Toon (AUSCOAL Superannuation) • Don Morcombe • Stephen Garrett • Lisa Saunders (Altitude Private Wealth) • Christopher Young (The Trust Company) • Stephen Bray (Quadrant First) • Jo Scott (ASFA) • Nigel Eaton (SIS Technologies) The Super Review team thanks all those readers who participated in this year’s survey. SR SUPERREVIEW

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THE median growth superannuation fund finished the financial year just into double-digit territory, according to the latest analysis released by Chant West.

The Chant West data showed the interim return for the median growth fund was 10.4 per cent, comfortably ahead of the long-term expected return of 6-7 per cent a year.

Chant West principal Warren Chant said the turnaround after two negative years was largely driven by a resurgence in listed share and property markets – something which suited the investment strategies of master trusts run by banks and

Warren Chant

wealth management companies, which finished the year ahead of the industry funds.

“After powering along for much of the year, share markets wobbled in the last quarter but, even so, the median growth fund managed a double-

digit return,’ Chant said.

According to the Chant West data, the top performing growth funds were BT Multi-Manager Balanced returning 13.9 per cent, Russell Balanced returning 13.5 per cent, CFS FirstChoice Growth returning 13.3 per cent, LGSS Diversified returning 12.8 per cent, MLC Horizon 4 returning 12.7 per cent, ING OptiMix Balanced returning 12.3 per cent, AMP Future Directions Balanced returning 12.3 per cent, Maritime Super Balanced returning 11.9 per cent, Asset Medium Growth returning 11.9 per cent and CBA OSF Mix 70 returning 11.8 per cent. SR

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NAB and BNY Mellon in joint venture discussions NATIONAL Australia Bank (NAB) has confirmed it is in discussions with New York-based BNY Mellon to deepen their relationship around asset servicing, including a possible joint venture.

In an announcement released to the Australian Securities Exchange today, NAB said NAB Asset Servicing

was in discussions with BNY Mellon Asset Servicing “with regard to deepening the long-standing partnership and enhancing the range of products and services available to clients”.

The announcement said that over coming months, specific elements of an expanded partnership would be explored and that the deeper partnership

could take the form of a joint venture combining NAB’s offering in the Australian asset servicing market and BNY Mellon’s extensive global capability.

Commenting on the move, NAB Asset Servicing executive general manager Leigh Watson said the discussions reflected growing client demand for global capability. SR

Market dominance leads to rent-seeking MARKET concentration has a significant impact on the fees some service providers charge superannuation funds, according to new research released by the Australian Prudential Regulation Authority (APRA).

The research looked at the costs and governance issues around superannuation funds outsourcing to both third and related parties and concluded that market concentration has a significant effect on fees.

It said that in the more competitive markets such as administration and investment management, service providers with high market shares were associated with lower fees.

However, this contrasted with more concentrated markets such as custody, actuarial and auditing, where service providers with high market shares were associated with higher fees.

“This suggests that service providers in concentrated markets may be extracting rent from superannuation trustees,” the researchers said. SR AUGUST 2010

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IFSA now officially FSC THE Investment and Financial Services Association (IFSA) has officially become the Financial Services Council.

IFSA members formally agreed to the name change at a general meeting in Sydney yesterday.

Members voted to change the organisation’s name to the Financial Services Council and adopted an expanded man-

date to more actively engage in economic policy in Australia. The council represents the retail and wholesale funds management, superannuation and life insurance industries, which are collectively worth $1.4 trillion.

Chairman David Deverall said the wider focus was critical and that the financial services sector had an obligation

to speak on broader economic policy issues that affected the nation.

Chief executive John Brogden said the council would work with government, regulators and other stakeholders to ensure Australia had the best investment, regulatory and business environment.

“We will continue to work on the issues that enhance the domestic investment

John Brogden

environment and assist in building the retirement savings, wealth and, ultimately, the lifestyles of all Australians,” Brogden said. SR

Confidence up among global institutions

By Chris Kennedy The latest State Street Investor Confidence Index shows that global investor confidence rose from 91.2 to 96 points in the month of June, with the biggest jump in North America but the highest overall levels in the Asia Pacific.

Confidence in North America increased by 5.4 points to 99.9,

in Europe by 2.4 points to 100 while Asia was up 2.1 points to 104.5.

The index analyses the buying and selling patterns of institutional investors and assigns a meaning to changes in risk appetite, with a greater allocation to equities signalling higher confidence. The index is purely quantitative rather than factoring in opinions.

“This month saw concerns about the sovereign debt situation in Europe providing a catalyst for confidence,” said index developer and Harvard University professor Ken Froot.

“The sequence of relatively disappointing macroeconomic data emerging from the US over the month led to a decline in global equity prices, but institutions have responded by seeking to capitalise

on these lower valuations.”

Fellow developer Paul O’Connell from State Street Associates said confidence rose across all three regions following relatively strong earnings announcements from the US corporate sector and improved macroeconomic readings from Europe.

This means investor confidence is markedly more positive

than consumer confidence, which fell in June, and the last time such a divergence occurred in February 2009 equity markets went on to rally, O’Connell said.

“It remains to be seen whether slower US growth in the coming quarters and ongoing government and consumer de-leveraging will present an obstacle to such a rally this time round,” he said. SR

Metlife provides insurance Queensland energy funds to merge for ALI’s mortgage brokers Metlife Insurance has formed a strategic alliance with mortgage protection specialists ALI Group to provide ALI with an exclusive mortgage and loan protection product for the next five years.

Metlife was impressed with the ALI business, which provided a natural fit to Metlife in looking to develop and provide low-cost high-value life insurance products, said Metlife Australia chief executive Marc Lieberman.

The agreement creates opportunities for Metlife, which doesn’t currently do a huge amount of work in the mortgage sector, to distribute more life insurance product through ALI, Lieberman said.

The alliance will also enhance the service ALI Group’s brokers and policyholders receive, according to ALI Group executive SUPERREVIEW

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QUEENSLAND-based funds ESI Super and SPEC Super have agreed to merge, creating a $3.8 billion fund.

The agreement was announced following the completion of legal and tax due diligence. The merger is expected to be completed before the end of March, next year.

Commenting on the merger, the chairman of both funds, Bob Henricks, said it would deliver benefits to members of both funds including greater scale, better investment opportunities, and cost-sav-

chairman Huy Truong.

“This is a pivotal and exciting development for our business as it secures an insurance partner with a strategic interest in the long-term growth and success of ALI Group and brokers who offer cover,” Truong said.

ALI Group has 4,000 mortgage brokers and has purposebuilt its business to provide simplified mortgage and loan protection via the mortgage broking industry, the company said. SR

ings in the order of $2 million a year through shared services and greater synergies.

Henricks said that, on the surface, ESI Super and SPEC Super shared many common attributes including a focus on the energy industry. He added that the decision to merge had not been taken lightly.

Henricks said the merged structure would adopt SPEC Super’s streamlined administration model, while ESI Super’s existing team would be responsible for the funds management and financial services of the new merged fund. SR

Time to revisit fixed interest GLOBAL consultancy Towers Watson has urged superannuation fund trustees to revisit their fixed interest allocations to ensure their configurations remain relevant.

Towers Watson said a prolonged period of inverted yield curves and tight credit spreads, followed by the global financial crisis and subsequent issues in global sovereign bond markets, had presented a chal-

lenging range of environments for fixed-income portfolios.

“If investors have not already done so, we believe that it is an appropriate time to revisit the objectives for this asset class and to ensure that portfolio and manager configurations remain fit for purpose,” the analysis said.

It said that trustees needed to consider more than just the percentage of their allocation

towards bonds, and to also take account of duration and consequent exposure to risk factors.

On the question of active versus passive management, the Towers Watson analysis said there was no one-size-fitsall solution and that certain factors, including investor belief, comparative costs, complexity and fund size, had a large bearing on the issue. SR

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Australian investor sentiment hit by poor returns

By Chris Kennedy INVESTORS hit by poor returns are flocking to safe haven assets, with appetite for Australian shares down sharply, according to the quarterly ING Investor Dashboard Sentiment Index.

The survey of 3,792 investors included 307 Australian investors with liquid assets of US$100,000 or above and revealed Australia is now second last of 12 Asia Pacific countries in positive sentiment, down from equal second in March.

Less than half of the Australian investors surveyed expected higher returns over the coming quarter, down from

three-quarters in the previous review.

The prospect of further rate hikes was also damaging sentiment, while Australian investors continued to view a US economic recovery with caution.

ING Investment Management (INGIM) head of distribution and deputy chief executive Martin Donnelly warned of the downside of being too cautious, with INGIM predicting a strong US recovery in 2010.

“Investors with an overly bearish outlook for the US economy run the risk of missing out on return upside from Australian companies which are leveraged to a US recovery, which is

our expectation,” he said.

Prospects in China continued to buoy Australian sentiment, although investors from other countries were more concerned about China’s chance of overheating.

More than a third of investors expected

Planner banned over unlicensed funds AN Australian Securities and Investments Commission (ASIC) investigation into unlicensed funds, including the Super Save Superannuation Fund and the Integrity Plus Fund, has resulted in a NSW man being banned from providing financial services for five years.

The regulator announced that Barry Frank Jennings of Berry, on the NSW South Coast, had been banned following an investigation that found he had failed to comply with financial services laws when he provided services on behalf of Future Trading Corporation

(FTC) between 14 December, 2004, and 5 December, 2007.

ASIC said it had concluded that neither FTC nor Jennings held an Australian Financial Services Licence nor were either representatives of a licensee in relation to the financial products they were advising on.

It said that in Jennings’ case, he was found to have provided advice to approximately 50 clients on setting up self-managed superannuation funds and offshore companies to invest in unregistered financial products. SR

Mercer to provide investment advice for Nationwide Super MERCER will provide a comprehensive investment consulting retainer service to the $380-million superannuation fund Nationwide Super in a five-year agreement.

The decision to appoint Mercer was based on the strength of its investment team, its reputation for leading edge research and its ability to offer a flexible suite of investment service, according to Nationwide Super fund secretary Ian Morante.

“Mercer demonstrated that they could provide specialist investment advice across a range of asset classes delivered through a combination of traditional and/or implemented solutions,” Morante said.

Graeme Mather, business leader for Mercer’s Investment Consulting business

in Australia and New Zealand, said the appointment demonstrated the relevance of Mercer’s service offering to the industry fund sector.

“We are continuing to strengthen our team and plan to add to the 120 staff we already have in the investment business in Australia,” he said.

Mather said Mercer was working on enhancing the capability of its global manager research boutiques to streamline the integration of its advice and research solutions.

The appointment was made after Media Super announced it had appointed Mercer to provide outsourced administration and member services in a fiveyear contract. SR

further share market falls, which was driving a shift to safer investments such as cash, gold and bonds, with only a third of investors considering high growth investments.

“The ongoing volatility in the Australian equity market has had a big effect on investor confidence and we expect many to retreat to the sidelines for the remainder of the year,” Donnelly said.

Despite the recent slowdown, the Australian share market should continue to rise. “Last year was a beta year.

2010 is shaping up to be an alpha year where true stock selection will be paramount,” he said. SR

Plum wins another mandate FRESH off the back of gaining a corporate superannuation mandate from the BP Superannuation Fund, MLC-backed Plum Financial Services is understood to have picked up another significant mandate.

Plum is understood to have won the BNP Paribas corporate super mandate, which was previously run by Watson Wyatt, with administration services outsourced to IBM. Plum announced recently that it had picked up the $470 million, 2,500-member BP Super Fund, which follows mandates involving the Royal Automobile Club of Victoria, Merck Sharp & Dohme and NAB Staff Superannuation Fund. SR

LUCRF content to stand alone LUCRF Super is committed to its current client base and is content to stand on its own two feet without looking at consolidation with other funds, according to chief executive Greg Sword.

“Our view of the world is that we’re pretty competitive, a lot of the bigger funds charge more than we do and we’re doing pretty well,” he said.

“There’s no reason to think that having fewer big funds is going to be any better for consumers than having fewer bigger banks is.”

LUCRF is also in the process of establishing an intra-fund advice service for members, with an option for personal advice for members who want it.

Most industry fund members only want or need simple advice around investing their super and transitioning to re-

Greg Sword

tirement, and their largest assets are their homes and super funds, Sword said.

Because there is little money to be made for advisers from these types of clients, it is important members can access this type of information from their super funds.

LUCRF’s call centre is up and running in a trial capacity, with a full launch expected sometime around early September after member statements have been sent out in August, Sword said. SR AUGUST 2010

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APRA research hits retail funds RESEARCH carried out within the Australian Prudential Regulation Authority (APRA) on outsourcing in the superannuation industry has again delivered a strong endorsement of the model pursued by not-for-profit funds at the expense of retail master trusts.

The research, undertaken by Kevin Liu and Bruce Arnold, was made public by APRA and concludes that while using related parties to provide particular services is not, of itself, detrimental to fund members, “the trustees of retail funds pay significantly higher fees to related service providers”.

It said that, in contrast, the fees paid by trustees of not-for-profit funds to related parties were not significantly more than those to independent service providers.

The Liu and Arnold research then went further and said that the largest difference between not for profits and retail funds occurred with respect to administrative services, where they had found “strikingly different fee models used in different contexts”. They said that for independent administrators and not-forprofit related party administrators, the fees were predominantly related to the

number of members in a fund whereas, by contrast, retail fund related party administrators paid a large fixed fee plus a variable component based on assets under management.

ASFA awards recognise member engagement

By Chris Kennedy The Association of Superannuation Funds of Australia (ASFA) has recognised superannuation funds for producing campaigns that improve member engagement at the sixth annual ASFA Communications Awards held in Melbourne.

Twelve campaigns were awarded across six categories, and were judged by panels of marketing and communication professionals across the super industry, according to ASFA. Campaigns were recognised for raising awareness around topics such as member benefits and missing tax file numbers, or for innovation or campaign integration. Winners included AMP, HOSTPLUS, AustralianSuper and GESB. “ASFA research tells us that members are more engaged than ever with their superannuation and that is due, in no small part, to the excel-

Pauline Vamos

lence we continue to see in marketing and communications campaigns,” said ASFA chief executive Pauline Vamos.

The awards recognise excellence in member and industry communication and help raise the overall standard by identifying best practice, Vamos said.

“I am delighted with the level of industry participation in the awards. This year we’ve had representation from all sectors of the industry, including many first-time entrants.” SR

More members to receive limited advice online AN increase in online advice offerings is the way of the future for super funds providing a total advice package to members, according to Australian Super.

“There is a limitation to what proportion of our members we can reach through the phonebased channel, so we’re quite strong advocates of doing more from an online perspective,” said Australian Super’s general manager of marketing and communications, James Coyle.

The challenge is to help as many members as possible in simple situations that are classified as personal advice, such as contributions SUPERREVIEW

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strategy, investment choice, transitioning to retirement and insurance, which are included within the super product but are covered by intra-fund advice, he said. The vast majority of members need help in these areas rather than comprehensive advice, he added.

Statements of Advice (SoAs) could be provided online with the option of expanding on that through a telephone advice service and complementing that advice in a face-to-face advice service for members who need it.

A webcam service where members could interact with an adviser or an online messaging service

where people post questions could also be viable options, Coyle said.

“Online SoAs don’t replace people and advisers but they can supplement them and they can give people access to help,” he said.

Australian Super already has a call centre that provides factual advice, with qualified advisers available to provide intra-fund advice in areas such as contribution strategy.

Callers who have a more indepth query are transferred to the financial education and advice team run out of Super Partners, and the fund also offers face-toface advice. SR

“These different approaches result in the median fund paying $12.2 million in fees under the retail-related administrator versus only $2.3 million to a service provider who was independent or not-for-profit related,” it said.

The researchers suggested that the approach adopted by not-for-profit funds was designed to minimise the cost of delivering superannuation to the fund’s members, while the outsourcing by retail funds “does not appear to be intended to reduce members’ costs, but instead may constitute part of the revenue model for the retail superannuation product”. SR

Super makes Australians happy AUSTRALIANS are among the most satisfied people in the world with almost 90 per cent satisfied with their lives – and the peace of mind granted by our superannuation guarantee may be a key factor, according to the latest AMP.NATSEM Income and Wealth Report: The Pursuit of Happiness.

Australia ranked behind only Ireland, Norway, Denmark, Finland and Canada among OECD countries, and NATSEM author senior research fellow Rebecca Cassells said that superannuation was one of the assets studies, that was highly correlated with happiness.

“Anything that’s going to increase security and living standards, which is what the superannuation guarantee sets out to do, is going to affect people’s satisfaction levels,” she said.

AMP Financial Services managing director Craig Meller said that overall satisfaction was affected both by the things that people enjoy and the things that people worry about.

“The thing about super is having long-term savings and knowing you’re going to have

safety in retirement … is taking away one of those worry issues, but in many other countries they’re still there,” he said.

“In many countries they’re now worrying about whether the country is going to be able to afford to pay any aged pension at all let alone anything on top of that. That link to long-term savings is an important one and the fact that most Australians know to a certain extent that because of the super guarantee they’ve got it sorted is a positive contributor,” he said.

The report also found that among working Australians, those who worked less hours were more satisfied overall than those who worked long hours but job seekers were least satisfied, and lower levels of debt (under $100,000) were more likely to lead to dissatisfaction than higher levels of debt, possibly because those with higher levels of debt were more financially stable or paying off a secure asset such as a house.

Overall, Australian workers were happy with their security, flexibility and the nature of their jobs but less satisfied with their working hours and pay, the report states. SR

10 NEWS

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Retail members lose out to shareholders

Fiona Reynolds

INDEPENDENT research from the Australian Prudential Regulation Authority (APRA) highlights the conflicting commercial arrangements in retail super funds that are eroding member benefits, according to Australian Institute of Superannuation Trustees (AIST) chief executive Fiona Reynolds.

“While these findings show that outsourcing in the not-for-profit sector delivers value to members, the opposite appears to be the case when retail funds

Long-term benefits of equity income INVESTORS are being urged to consider the long-term benefits of equity income as interest rates and income payable on other asset classes, particularly government bonds, have fallen dramatically following the global financial crisis.

A white paper entitled “The case for equity income investing” by the Newton group of asset management companies that form part of BNY Mellon Asset Management claims that income-focused investing will help to achieve a growing level of income as well as increasing capital.

Dividends tend to remain more stable than company earnings, offering protection in bear markets, and a yield-focused approach could also accelerate returns in a market recovery, the report stated.

Businesses that pay a dividend don’t necessarily have lower growth potential, with Newton quoting a US study by Arnott and Asness that demonstrated a positive link between dividend payouts and earnings growth, possibly due to greater capital discipline.

“A dividend is evidence of a firm’s profitability and represents a commitment by the management of a company to return the cash flow it generates to shareholders on a regular basis,” said Newton chief executive Helena Morrissey.

“By investing over the long term in income generating equities, we believe investors could enjoy real growth in income together with long-term capital growth,” she said.

“By being allied to a robust global thematic investment process, [Newton’s] investment team is able to focus on continuing to try to deliver a steadily growing level of income distributions for new and existing clients despite challenging market conditions.” SR SUPERREVIEW

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outsource to related parties,” Reynolds said.

“We’ve known for some time that notfor-profit funds outperform their retail fund rivals. This latest research is proof that some retail funds are more interested in performing for shareholders than their own members.”

It was hoped the Government would adopt recommendations in the final phase of the Cooper Review that dealt with conflicted outsourcing arrangements, Reynolds said.

“The battle isn’t only about fees and

commissions paid to financial advisers.

It’s clear that without legislation, some funds will continue to feed their shareholders ahead of their members.”

The APRA research showed that some retail funds were using relatedparty administrators and paying significantly higher fees, almost doubling the median member’s cost load, while median retail funds were being charged 86 per cent more for asset allocation services than median not-for-profit funds, according to AIST. SR

AUSCOAL Super appoints former league stars ESI issues five AUSCOAL Super has appointed former Rugby League stars Tony Butterfield and Adrian Vowles to its business relationship team.

AUSCOAL chief executive Bruce Watson said a key reason for the appointments was the fact that much of the fund’s membership was based in Rugby League heartland areas such as central Queensland, the Hunter Valley and Wollongong.

As well as having a rugby league background, both men are well qualified in their own right, having worked and proven their effectiveness in similar roles in the past, Watson said.

The players’ football profiles “creates a good basis for initial discussions, and they’re going to work very hard to strengthen our already strong relationships in the industry and build new ones,” he said.

Butterfield, who captained the Newcastle Knights and represented

new mandates

New South Wales in State of Origin, was also president of the Rugby League Professionals Association.

Vowles is a former Queensland State of Origin representative who also played for the North Queensland Cowboys.

“Having two of Rugby League’s greats on our team is both an inspired and strategic choice for AUSCOAL Super,” Watson said. SR

ENERGY industry fund ESI Super has awarded five new Australian equities mandates.

The fund announced that it had awarded the mandates to Balanced Equity Management, Greencape Capital, Hyperion Asset Management, JF Capital and Legg Mason.

The mandates were announced by ESI Super chief executive Robyn Petrou, who said they reflected the fund’s growing size and internal expertise.

Announcement of the mandates follows confirmation that ESI Super would be moving to merge with SPEC Super to create a $3.4 billion fund. SR

SuperChoice added to MicrOpay for simpler super processing SUPERCHOICE superannuation exchange is collaborating with Sage MicrOpay to give its customers access to Express Super, an online superannuation processing functionality.

The functionality has been integrated into Sage MicrOpay’s Meridian payroll software, meaning clients can process employee superannuation requirements easily online, according to SuperChoice.

The average small or medium business makes contributions to at least 12 funds, while larger organisations often send payments to many more, according to SuperChoice chief executive Peter Philip.

The MicrOpay system means customers can pay employee super through their payroll system without having to log on to multiple systems, he said.

Sage MicrOpay managing director Craig Osborne said

many customers struggled with superannuation choice paperwork and fund compliance.

“We sought to collaborate with the leading clearinghouse provider to help manage this problem, and also help our customers realise the benefits of a paperless office environment,” he said.

Employers were looking for solutions that would reduce the red tape of making super contributions, he said.

Philip said payroll software was an important channel to drive take-up of e-contributions, which would result in cost savings.

“The burden of compliance is increasing for business and using electronic solutions like the ones MicrOpay and SuperChoice have announced will become the standard way of doing things in the next few years,” he said. SR

EDITORIAL 11

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Whole new ball game No matter which party wins on 21 August, the superannuation industry should not expect a rapidly changing environment. Much will depend on the make up of the Parliament and the priorities of the Government.

Mike Taylor

F

ederal elections are not often won by Oppositions.

Mostly, they are lost by incumbent Governments.

At the time of writing, the opinion polls were suggesting the 21 August election would be a close-run affair, but Australian political history suggests the electorate almost always grants first-term Governments a second term.

That being the case, the superannuation industry can look to an element of continuity.

However, those expecting that a newly-elected Labor Government will simply take up where it left off may find themselves being rudely surprised.

Two things need to be taken into account. Given his seniority and relative factional influence, Chris Bowen will very likely be

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A Coalition Government can also be expected to apply a good deal more scrutiny to the funding of television advertising by industry superannuation funds.

elevated to a portfolio well beyond the mid-tier role of Minister for Financial Services, Superannuation and Corporate Law and a new, more junior minister will fill his shoes.

Apart from Bowen, the Australian Labor Party’s most experienced operative in the financial services arena is the current Assistant Treasurer, Senator Nick Sherry, who lost the Financial Services portfolio less than half-way into the Government’s first term. Sherry will be a part of the new Parliament because his Senate term does not expire until 2014.

However, given the negative political assessment that might be applied to reappointing Sherry to the role, it is likely that a re-elected Prime Minister Julia Gillard would opt to appoint a newer face to the portfolio.

In the event that Sherry did find himself again running the financial services portfolio, he would at least have some familiarity with the recommendations of the Cooper Review and the context in which it was established.

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It was, after all, Sherry who originally commissioned the Cooper Review and described the context of the exercise as being a bid to “renovate the house”. His views on whether the Cooper Review recommendations represented a “renovation” or a complete makeover might prove interesting.

Irrespective of who ultimately takes charge of the portfolio, the superannuation industry can be sure that, initially at least, the Government will not move much beyond the implementation of Cooper’s Superstream recommendations.

Everything else, including MySuper, will be dependent on completing the necessary consultative process and the legislative priorities of a new Government and a new minister.

If a Coalition Government is elected, the superannuation industry can expect that the implementation of the Cooper Review recommendations will likely be confined to Superstream, with MySuper perhaps being utilised only insofar as it serves to dissolve the default super arrangements that emerged from the modern awards process.

A Coalition Government can also be expected to apply a good deal more scrutiny to the funding of television advertising by industry superannuation funds and the perceived political link-

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ages between industry funds, unions and the Australian Labor Party.

However, as much as the Coalition might find industry funds not to its liking, the experience of the Howard Government’s time in office suggests that it will not move significantly to alter the status quo. It can, however, be expected to be less enthusiastic about intra-fund advice and eliminating commissions from all facets of the financial services industry.

Whichever party gains office on 21 August, they will be confined to just one Parliamentary session before adjourning for the traditional Christmas/New Year recess. That means whatever changes are ultimately pursued with respect to superannuation are unlikely to occur much before the middle of 2011.

Elections not only have a capacity to change the parties in power, they also change the make-up of Parliaments. Therefore, the degree to which a reelected Labor Government is prepared to pursue the harder Cooper Review recommendations will also be dependent upon the balance of power in both the House of Representatives and the Senate.

The bottom line is that, irrespective of the final outcome, the superannuation industry should be prepared to start a whole new ball game after 21 August. SR

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12 COLUMN

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Getting value for money Trustees risk exposure to legal action if the performance fees paid to fund managers are not reflected in the returns generated for members, writes NOEL DAVIS.

T

rustees risk exposure to legal action if the performance fees paid to fund managers are not reflected in the returns generated for members, writes Noel Davis.

Superannuation funds offered to the public sometimes include investment options under which the investment manager is entitled to performance fees if investment returns exceed a base level, in addition to the normal fees charged by investment managers. Those base levels are sometimes set quite low, for example 4 or 5 per cent per annum.

Under some arrangements, the investment manager is entitled to 20 to 30 per cent of the investment return that exceeds the base level.

It is usually the case that the investment manager does not suffer any detriment (other than not receiving the performance fee) if the return is below the base level. It is, therefore, only the investors who are detrimentally affected by poor returns.

Under some arrangements, whether the investment manager is entitled to a performance fee is determined on a monthly basis. A consequence of that in an equity fund is that if there is a spike in the share market one month and a downturn the next month, the investment manager receives a performance fee in the first month but is not required to repay any of it to the members the next month. It is arguable that such an arrangement operates unfairly for investors.

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There are risks to both investment managers and trustees of superannuation funds, as well as advisers, in entering into such arrangements, which are discussed below.

INVESTMENT MANAGERS If a member of a superannuation fund has had performance fees deducted from the members’ investment returns in past years, it is open to the member to argue that those amounts should be reimbursed to the member if any of the legislative provisions discussed below have been breached.

The ASIC Act permits a person who has suffered a loss through a breach by an investment manager of any of the provisions of the Act to claim compensation for the amount of the loss. A claim for reimbursement can be brought by a member, a group of members or by ASIC on behalf of members.

A section of the ASIC Act prohibits unconscionable conduct in providing financial services. In determining whether there has been such conduct, a court can have regard to the relative strengths of the bargaining positions of the investment manager and the member. Very often, the member will have had no bargaining position with the investment manager because the selection of the investment option was done by the trustee of the superannuation fund.

A court may well take the view that, in those circumstances, it was unconscionable

for an investment manager to be entitled to a significant percentage of the investment return generated by the member’s superannuation money.

Another provision of the ASIC Act that may be relied on by a member is that which prohibits misleading or deceptive conduct in providing a financial product, or conduct which is likely to mislead or deceive. Also prohibited is conduct that is likely to mislead in relation to the characteristics of a financial product.

This provision may be invoked if there has been inadequate disclosure to members of the way in which the performance fee operates.

A breach of any of these provisions of the ASIC Act constitutes a criminal offence, including by anyone who aids or abets the breach, such as an employee or an adviser. In addition to the long-term impact on a person of a conviction, the fine that can be imposed may be significant. However, a greater financial detriment to an investment manager may be having to reimburse performance fees to a significant number of members for a number of years, if members or ASIC succeed in arguing that the ASIC Act has been breached.

In addition to the ASIC Act, the Corporations Act also prohibits false, misleading or deceptive conduct. It creates an offence for preparing a defective Product Disclosure Statement (PDS) (one that is misleading

or deceptive or omits relevant material) and for failing to provide a PDS to a person to whom it was required to be given. These provisions could be breached in failing to adequately disclose the terms of a performance fee or in failing to give a PDS to a member to whom it should be given. A member could bring a

claim for a loss that the member claims has been incurred as a result of any of these provisions of the Corporations Act being breached.

TRUSTEES The provisions of the ASIC Act and the Corporations Act discussed above apply equally

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to trustees of superannuation funds and it is open to members to seek reimbursement from trustees for losses caused to the members by performance fees having been deducted by investment managers.

An additional obligation that is cast on trustees of superannuation funds under the Su-

perannuation Industry (Supervision) (SIS Act)is to exercise, in relation to all matters affecting the fund, the same degree of care and diligence an ordinary prudent person would exercise in dealing with a member’s money. Another obligation under that Act is to ensure that the trustee acts in the best interests of its members in carrying out its functions.

One of the functions of trustees is to select the investment options that will be offered to fund members.

In selecting the investment options, the trustee has the SIS Act obligations mentioned above.

An issue that will inevitably arise if a member brings a claim against a trustee and an investment manager for reimbursement of performance fees in an investment option in which the member has been placed (which in the majority of cases would be a default option) is whether the trustee, in allowing that investment option to be included in the fund, acted with the required level of care and diligence and in the best interests of members.

The first mentioned obligation requires a trustee, in selecting the investment options to be offered to members, to approach it with the care that an ordinary prudent person would in looking after another person’s money.

In a decided case dealing with this obligation, the Administrative Appeals Tribunal said this obligation requires a trustee to approach each issue in the same way that an ordinary person who is careful, astute and exercises sound judgment would in looking after another person’s money, where there is an obligation to look

In a Victorian Supreme Court case, the judge said that the obligation would call into question whether the trustee has sufficiently pursued the members’ financial interests.

after it. According to the tribunal, a test that can be applied in determining whether the obligation has been met is for the trustee to ask what the members would have done to protect their own positions and to promote their own financial welfare in these circumstances.

In applying this test, it may well be arguable by a member that he or she would not have selected an investment option under which 20 to 30 per cent of the investment return, above the base level, generated by their invested money went to the investment manager rather than their superannuation account.

The separate obligation to act in a member’s best interests is an onerous one. A NSW Supreme Court judge said in a decided case that meeting it requires consideration of what the member would have done in the circumstances in selfishly looking after their own interests.

In a Victorian Supreme Court case, the judge said that the obligation would call into question whether the trustee has sufficiently pursued the members’ financial interests in making its decision.

A member, in arguing that this obligation had been breached by a trustee in selecting an investment option under which performance fees are paid, may be able to submit, with some force, that the member, in selfishly looking after their own interests, would not have knowingly agreed to giving away 20 or 30 per cent of their investment return, above a base level, to an investment manager, particularly where the investment manager makes no reimbursement if there are investment losses.

If a member’s argument that any of the above-mentioned legislative obligations have been breached is accepted by a court, the trustee may be ordered to reimburse the member for the performance fees that have been deducted from the member’s investment return. The fact that an investment manager, rather than the trustee, has received the performance fees would not prevent a court from deciding that the trustee should pay compensation to members if the court decision is that the trustee has breached one of these Acts.

SUMMARY Where performance fees apply and any of the legislative requirements discussed above have been breached, both investment managers and trustees are at risk of having to reimburse the members for fees that have been deducted in the past. The usual limitation period is not relevant.

There is also the risk that trust law obligations may have been breached, resulting in compensation being payable.

The possibility of a class action being brought by members or of ASIC bringing a claim on their behalf cannot be discounted.

In some instances, it may be appropriate to assess the risk of such claims succeeding, to determine whether the existing arrangement should be continued or whether any changes should be made. SR Noel Davis is a barrister and company director. He is the author of The Law of Superannuation in Australia and editor of the Australian Superannuation Law Bulletin.

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14 FIXED INTEREST

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Fixing on safety A less than stellar quarter to end the last financial year combined with continuing global uncertainty means fixed interest remains on the radar for most superannuation funds, writes DAMON TAYLOR.

I

n recent months, the superannuation investment story has consistently been about rallying equities markets.

Yet while equities may often be the star performer, steadier fixed income investments are those that saw many funds safely through the trials of recent years and, according to Nick Bishop, portfolio manager for Aberdeen Asset Management, continue to deliver returns that should not be overlooked.

“Fixed income performance has actually been pretty solid, especially considering what equity markets have been doing,” he said. “If we look, for example, at the composite performance for our fixed income funds generally, then the one-year numbers to the end of June were at a 10 per cent total return, for two years the average annualised return was over 11 per cent, the threeyear was over 8 per cent and the fiveyear is looking like a slightly more normal 7 per cent.

“So in the context of what equities have been doing and in the context of an RBA [Reserve Bank of Australia] that’s been hiking rates, that’s actually a pretty solid return,” Bishop continued.

“But what’s really been driving that has essentially been forward-looking growth – it’s not been good enough to mean that yields sell off in an aggressive way, so there’s still been solid support for yields.

“High yields have remained relatively low and that’s meant that returns haven’t been negative – have in fact been positive – and you’ve had a correction in credit spreads.”

Bishop added that there was obviously a reasonable correlation between credit spreads and equity markets and that when equity markets did well, spreads contracted and resulted in a positive for fixed income.

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“So depending on what you get from credit markets, it’s not always the case that rallying equity markets mean rubbish returns from fixed income,” he said.

Also seeing good performance and good returns from fixed income investments over the last 12 months, Roger McIntosh, head of investment, strategy and research at Vanguard In-

Roger McIntosh

vestments Australia, said it was no surprise that credit had done particularly well in light of equity market rallies.

“Of course, as yields have risen, government bonds haven’t done as well,” he said. “But if I had a dollar for every person who’s been worried about what’s going on with governments globally then I’d be a rich man – at the end of the day, while what’s going on in Europe might be an interesting conundrum, intrinsically governments can’t default on debt in their own currency.

“People have been inordinately worried about it but returns have still been good. Our fund, over the last year to the end of May, was up around 6 per cent in Aussie, and obviously credit has done well too,” McIntosh continued. “So

rough and dirty, you’ve seen about 6-‘ish’ per cent from the index for Aussie, and for global it’s higher at around 11 per cent, give or take a bit.”

McIntosh said that while fixed interest returns hadn’t been as strong as that from equities in recent months, with yields rising and the price dropping, those with diversified bonds portfolios were seeing their coupons reinvested at higher yields.

“So the returns tend to stay even though they drop in the scheme [as a] whole,” he said. “All these people crow and worry about government debt and I kind of worry about people who say government debt is not a good thing and that you should only be in credit.

“We still believe there’s a genuine role for both asset classes – it’s not like you have to be in one or the other,” McIntosh added. “Long story short, fixed interest has done well as an asset class, especially given that equities have been the stellar performer.”

GFC LESSONS Of course, the performance of fixed interest investments matters little if super funds are not paying attention to what lies within their fixed income portfolios. However, according to Matthew McCrum, director of investments for Omega Global Investors, most funds have taken the lessons of the global financial crisis (GFC) to heart and are paying much greater attention to how fixed interest portfolios are structured.

“If we roll back to post-GFC, a lot of people were really scratching their heads and wondering what they would do with fixed interest,” he said. “They probably not so much ignored it but left it to the side or they went into mortgage-backed securities or structured credit to try and juice up the return a

bit and they probably didn’t think about the risk as much.

“But now people are definitely spending a lot more time thinking about fixed interest and we’re seeing a lot of the bigger super funds actually hiring fixed interest specialists into their investment teams,” McCrum continued. “Internal investment teams are a trend that’s been going on for a long time, but fixed interest has been left off to the side.

“Now we’ve got funds hiring people

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and spending a lot more time thinking about it.”

More specifically, Bishop said that he could also see super fund investors examining fixed income quality and exposure much more carefully, but he added that Aberdeen would warn funds against segregating risk for the wrong reasons.

“At the more sophisticated professional investor level, I think there’s more attention being paid to credit quality

and to credit exposure and equally to sectors within your credit exposure,” he said.

“Pre-crisis we’d seen a much more aggregate-based approach where popular products were those that combined lots and lots of different sectors within fixed income, so-called DFI or diversified fixed income, but there are some global asset allocation advisers who are now recommending the segregation of those kinds of risks and saying on the one hand, treat your credit risk totally

separately and give that to one manager and on the other, treat your government bond risk separately – give that to another manager.

“Now we have a very strongly performing DFI product and we absolutely think that the way to approach fixed income is by accessing a number of different alpha opportunities, but what we don’t necessarily agree with is dividing your risk into a bucket that’s deemed to be low risk, which is your government

bond portfolio, and a bucket which is deemed to be higher risk, so your credit portfolio, and then allocating between them on that basis,” Bishop said.

“We think that the assumption that your government bond portfolio is the low risk portion of your portfolio is flawed and so what you really need to be doing is treating your portfolio fairly holistically and still as one aggregate mass, but being cognisant of the different risks that are coming from different sectors.”

According to McCrum, while many funds are certainly re-examining their fixed interest portfolios, the strategies coming from those examinations remain works in progress.

“Fixed interest comes in a lot of different flavours,” he said. “You can look at the more traditional, more vanilla fixed interest playing a defensive role in your portfolio, but then there’s a lot of other offerings – you can go into corporate bonds, you can go to high yield corporate bonds, you can go to emerging market debt – and so a lot of people are trying to work out where they put high yield bonds.

“Do they classify them more as an equity type of investment rather than a bond type investment? And emerging market debt, where do you put that?

Corporate debt has a relationship with equities markets, so where do you put that in your portfolio?” McCrum asked.

“So there are definitely a number of funds working through that and working out the answers to those questions.

“But on average, funds will continue to have government bonds and investment grade credit as the defensive parts of their portfolio while high yield corporate bonds that are more sub-investment grade will be treated more like low risk equity.”

GLOBAL FIXED INTEREST Perhaps not surprisingly, the sideline to what roles various fixed interest assets are playing within portfolios Continued on page 16

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16 FIXED INTEREST

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Fixing on safety ☞ Continued from page 15 has been how global fixed interest is entering the equation. The reality is that financial and economic disruption within Australia has been relatively mild when compared with the rest of the world, but according to McCrum, the result has been some interesting opportunities for those investors looking to diversify offshore.

“What we’re seeing is that a lot of investors who went through the GFC have realised the need to diversify out

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of Australia, and out of the Australian bond market in particular,” he said. “The reason for that is that the bond market in Australia, particularly on the corporate debt side, is very, very exposed to financials (the banks), and because there aren’t that many in the Australian market, the real genuine exposure to corporates isn’t there.

“So when looking offshore as a result, it’s one thing to talk about diversification but the flip side of that is to think about the return equation and the risk side,” McCrum continued. “On the return side, offshore bond markets, particularly

offshore corporate bond markets, are offering at very high yields, which is particularly good when you consider the risk being taken.

“Normally you’d think of high yields being proportionate to risk, but coming out of the GFC, it’s meant a lot of good opportunities, particularly in Asia.”

Interestingly, Bishop said that while the ups and downs of global fixed interest markets had been much more severe than those experienced in Australia, they had nonetheless followed the same patterns.

“Performance overseas has been an exaggerated version of what we’ve seen locally,” he said. “Credit markets offshore underperformed much more dramatically in 2008 and early 2009 but they also bounced much more dramatically from March 2009 onwards.

“Look at high yield returns in the US, for example, they outstripped equity returns in 2008-09. In absolute return terms in 2009, the US high yield market returned 58 per cent, which is a huge number, but in 2008 it was at negative 26 per cent,” Bishop said. “So that’s an awful lot of volatility that you just won’t have in the local market, and that’s because we don’t have the types of securities that will be affected in that way.”

However, Bishop said the key question was where to from here.

“And that’s not necessarily clear because Australia is very different in the sense that we’ve already started our tightening phase and arguably closer to the end than the beginning of monetary policy tightening,” he said. “Our yields have already risen a bit to reflect that monetary policy tightening, and that’s definitely not the case in the US or Europe and, as a consequence, you’ve now got some quite interesting spreads between Australian bonds and US and European bonds.

“There’s no doubt that if you’ve owned overseas government bonds, you’ve been rewarded, but more importantly, it’s been about owning high quality overseas government bonds,” Bishop clarified. “If

you’ve owned Germany, if you’ve owned the US, remarkably even if you’ve owned the UK, you’ve been rewarded because the yields have fallen so low and total returns have been so high.

“Now, the proviso in all of that lies in what you’ve done with your currency and how you’ve hedged it against a volatile Australian dollar, but that’s obviously the risk in investing overseas.”

LIQUIDITY Yet the concern overriding fixed interest portfolio construction for trustees continues to be liquidity. For most, if not all, Australian super funds the experience of the GFC is clearly top of mind, and for McIntosh that focus has also entered fixed income discussions.

“What you’ll find is that because you had a number of other market participants temporarily suspend redemptions and put moratoriums and extensions in place, and to be fair that’s not just fixed interest, what that did was sharpen investors’ focus on liquidity as one of the aspects that they consider,” he said. “One of the things I think indexing offers is that certainty of liquidity, and certainly within our portfolios that’s one challenge we want to ensure that we can always meet should the same circumstances happen again.

“Previously, investors may have thought of liquidity as a secondary consideration, but now it’s a primary consideration.”

McCrum said that just as institutional investors were asking more questions about the roles of various fixed income assets, they were also asking more questions about how liquidity was fitting into the picture.

“A lot of institutional investors are asking a lot more questions about liquidity, asking about whether these investments are liquid,” he said. “But the issue with fixed interest investments is that it’s hard to define what liquidity is.

So what I mean by that is, with an equity market you can look at it and you can measure liquidity, you can analyse it, you can see where the bid and offer is, you can see how much is there.

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“With fixed interest that’s hard to do because it’s not an exchange traded market,” McCrum pointed out. “The issue with fixed interest markets is how you measure liquidity. It’s easy to say that government bonds should be more liquid than corporate debt and that investment grade corporate debt should be more liquid than high yield corporate debt, but it goes further than that.

“The problem is how you measure that in a market that’s not transparent like an exchange traded equity market, and that’s what a lot of funds are grappling with.”

In terms of portfolio construction, Bishop said there was little doubt that fixed income managers were a lot more cautious when it came to liquidity.

“We give a lot more time to making sure that our analysis of risk across portfolios captures liquidity as a risk and we do factor it in,” he said. “For example, buy/sell spreads are an important area where an investor will see the effects of liquidity on their funds, so most operators of unit trusts are applying a much greater bias than they would have in 2006-07, and that can make switching more costly for the retail investor and indeed someone who is invested in that fund.

“So higher buy/sell spreads are a direct product of a relative lack of liquidity, but it also means that you have to take a longer-term approach to your investment philosophy,” Bishop continued. “What we’re typically saying to clients is that while you might like the attractions of emerging market debt that is high yield, you have to be cognisant that you’re not going to be able to turn around and exit that market quickly if suddenly you don’t like it as much.

“We have to communicate to clients that you need to treat these investments on a three to five to 10-year investment horizon rather than a six to 12-month horizon.”

Asked whether liquidity had forced changes in fixed interest allocations, Bishop said that it had probably provoked what he termed a barbell approach.

I would rather pay away a per cent or two of annual return for the safety that my capital is going to be much better preserved in a crisis event.

“What I mean is that if we want to preserve liquidity in portfolios and, at the same time, earn a reasonable return, we’re probably going to have a mixture in our funds of a higher amount of highly liquid securities (for example, semi-government bonds), commonwealth bonds and yet, at the same time, a dedicated allocation to less liquid securities that are paying us a very high yield,” he said. “So maybe some of the subordinated debt from European financials, some of the capital securities that you get from those financials, which are certainly not liquid, but they are paying you very high yields and a very high spread.

Matthew McCrum

“The fact that liquidity is now an issue means that you have to really adopt a barbelled approach in a portfolio where larger portions of your fund are in more liquid instruments but, at the same time, you have to ensure that you can offer reasonable returns to investors and you need a portion of your portfolio in those less liquid securities to earn a decent return.”

PORTFOLIO FIT However, despite the events of the GFC, it seems likely that equity markets will again deliver for super funds, if not to the extent that they did previously.

So the question, as always, lies in how fixed income investments will fit into

superannuation portfolios and what role they will play.

Contrasting equities performance with that of fixed interest, Bishop said that according to research released by the Organisation for Economic CoOperation and Development (OECD) in 2008, of the 30 OECD markets for superannuation returns that were looked at, Australia’s was second worst.

“Now why was that? It’s not because the Australia equity market tanked worse than the rest of the globe because it didn’t, it’s because super funds were overinvested in equities and so they took a bath,” he said. “So what we would contend is that even if you’re bullish on equities, in terms of downside protection and increasing the efficiency of returns from your portfolio, you need to have a reasonable fixed income allocation.

“I would rather pay away a per cent or two of annual return for the safety that my capital is going to be much better preserved in a crisis event,” Bishop continued. “We think it’s a price worth paying because it will repay you hugely if we have another 2008 scenario.”

For McCrum, if growth rates around the world aren’t going to be as high as before the GFC, from a return perspective fixed interest has to be a lot more attractive.

“Everyone bandies around the magic 10 per cent number for equities, but let’s say that it’s probably going to be lower than that,” he said.

“If we say that you can invest in global corporate bonds at the moment at 8 per cent yield for investment grade, so that’s 8 per cent yield or 8 per cent return compared to something that’s probably going to be lower than 10 per cent in equities, from a risk perspective equities are 12 per cent risk compared to bonds at 4 per cent risk. “So you’ve got three times less risk investing in global credit for a similar return. That should make everyone, but particularly super funds, think about their allocations and what their allocation to fixed interest is like.” SR AUGUST 2010

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18 MASTER TRUSTS

www.superreview.com.au

Show me the money In a superannuation environment where public perceptions of superannuation funds are only as good as the funds’ latest returns, DAMON TAYLOR writes that the global financial crisis has created an interesting new dynamic.

I

n an environment where investment performance remains the key, the global financial crisis (GFC) has highlighted the degree to which asset allocation has revealed stark differences between retail master trusts and industry funds.

While industry super funds gained the ascendancy during the turmoil of the GFC, based largely upon their exposure to unlisted assets, it is the retail master trusts that are leading the way during the current equity market recovery. For principal of Chant West Warren Chant, it will be interesting to see their evolution from here.

“Over the 12 months to June 2010, the retail master trusts’ performance has been about 3 per cent better than it has been for industry funds,” he says. “And that’s because markets were strong and they had more listed assets. Also, in this financial year we still had some further write-down of unlisted assets in the industry funds.

“Those two factors combined will show that in 2010, master trusts have performed quite a bit better,” Chant adds. “But if you go back to 2009, they were quite a bit behind and I think what we would say is that retail master trusts over the last few years have recognised that if they want to compete with the industry funds, they have to be SUPERREVIEW

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more prepared to invest in alternative assets.”

According to Chant, the retail master trust endeavour thus far has been to try and invest in the more listed versions of alternative assets.

“But I think there’s a growing understanding that they really have to invest in unlisted assets to some extent,” he says.

“So I guess we would say that within the retail master trusts, you only have to look at the way AMP has changed its strategic asset allocations, BT is looking to do the same thing, as is ING, as is Colonial First State.”

“They’re all looking at two things: one, whether they should be more active in their asset allocation; and two, whether they should have more alternatives and within that, a spread of listed and unlisted.”

From the master trust perspective, head of retirement products for Aon Consulting Peter Lewis says that while financial markets and the performance coming from them certainly present challenges, the Aon Master Trust has within its product set a range of investment options to suit the retirement planning needs of almost any individual, including Secure options that held up quite well during the GFC – with positive returns even during the financial year ended June 2008.

“The Aon Master Trust strikes daily unit prices, and therefore the investment options with a large exposure to listed sharemarkets will move to some degree with the market,” he says.

“Aon mitigates this market risk through diversification across asset classes, managers and investment styles. And within equities, the use of a number of different managers employing different approaches further reduces volatility.

“However, I would also argue strongly that our membership is supported by our education and engagement processes and [members] understand that as investment markets go up and down, they experience some movement in their returns if they have growth-oriented strategies,” Lewis says. “We have a wide range of investment options with different risk/return outcomes and it’s about making sure that our

members are in the right investment option for their specific financial objective. We can also validate this view by looking at the low number of member investment switches we received during the GFC.” The greater challenge, from Lewis’s perspective, and one that he says Aon prefers to focus on, is that of maintaining and enhancing member engagement.

“At Aon, we believe that we

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their superannuation fund to take a greater interest and make active and appropriate choices,” Lewis continues. “In the retail master trust segment, greater choice is where we can add value compared to the notfor-profit funds because we have that greater level of flexibility and choice, and it’s the engaged member who takes advantage of that.

“So our challenge is to maintain continuous development and bring innovative solutions to the market.”

relevant to consumers across the broad spectrum.

“The key for me is that we strongly believe in dynamic asset allocation in the sense of life stages and making sure that the asset allocation, at a strategic level, changes as someone gets older,” he says. “So we have a life stages product, which is pretty similar to what Cooper has recommended in that it makes sure that the asset allocation is not a ‘set and forget’ strategy forever.

DYNAMIC ASSET ALLOCATION

have a much higher level of engagement with our membership, and its engagement that they value,” he says. “One of the challenges that we face is to maintain and build on that and demonstrate value along that front.

“Aon Master Trust members are not just a number to us, not just one of the masses, so one of our challenges is to convince those working Australians that may not be fully engaged with

Yet the point made by Chant in terms of investment strategies is a valid one. After all, there are a number of asset consultants in the superannuation industry who have been advising dynamic asset allocations or strategic tilts for some time now and yet, according to Association of Superannuation Funds Australia (ASFA) chief executive Pauline Vamos, recent experience is encouraging all trustees to re-examine their strategies.

“So many investment experts and trustees were caught on the hop because asset classes were behaving in ways they never anticipated, and the correlation that they thought existed between various asset classes did not happen,” she says. “So I think all fund operators have been forced to have a close look at their portfolios and what their current strategies mean in terms of the benchmarks they’re trying to get to.”

Describing a different perspective on dynamic asset allocation, director of wealth management products at AMP Andrew Hobern says that the key is ensuring products remain

Warren Chant

“It does change as someone gets older, and is relevant to consumers throughout their working life and throughout their retirement.”

Lewis says that Aon had indeed observed the increasing use of dynamic asset allocation during the GFC. “The Aon Master Trust sees the value-add from regular rebalancing to its strategic asset allocation and has been following this discipline for more than 10 years,” he says. “Rebalancing to our strategic asset allocation enables us to keep more true to label.”

Of course, tradition dictates that one of the main points of difference between industry super funds and retail master

Master trusts will be looking to provide capital growth, but fairly secure returns as well, and it’s your unlisted that often provides that for them.

trusts does in fact lie in each sector’s exposure to unlisted assets. In the wake of the GFC, it has been suggested that while industry funds may move to more frequent unit pricing, retail master trusts may look to the greater use of unlisted assets within their portfolios. For Vamos, that may come down to the number of baby boomers rapidly approaching retirement.

“I think as we’ve got an ageing population and as more people in retail master trusts are moving into their 60s and they’re going into de-accumulation, many of the retail master trusts will be looking at their portfolios in terms of deaccumulation,” she says. “Master trusts will be looking to provide capital growth, but fairly secure returns as well, and it’s your unlisted that often provides that for them.”

“That alone may drive them to look at certain unlisted assets for certain portfolios.”

Vamos’ view is not one shared by master trust executives at AON or AMP – at least not for the time being.

Hobern says that there are a number of strategies that can be used to guarantee income streams for retirees, and that they are not contingent upon an exposure to unlisted assets.

“Generally speaking, we need to make sure that there’s an income stream for retirees, but that can be achieved in a number of different ways and doesn’t need to have unlisted assets or alternative assets,” he says.

“Ultimately, what’s required is that the funds are available for members when they need them – but obviously you need to balance up the expected return Continued on page 20

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Show me the money ☞ Continued from page 19 from different asset classes with the liquidity that those classes provide.

“We have some unlisted assets in property and in infrastructure, but generally speaking, master trusts will have some asset allocation towards unlisted and alternative assets – but it’s only going to be at a relatively modest level.”

With regard to unlisted assets, Lewis says that the Aon Master Trust holds only a small percentage of unlisted property within its pre-mixed options.

“However, considerations around ease of valuation and liquidity are important,” he says. “So while we don’t have an outright aversion to unlisted assets, there are a range of other considerations that come into play.”

So while those two points – that is, dynamic asset allocation and investment into unlisted assets – may most often be pointed to as causes for the performance differential between industry super funds and retail master trusts, they are a point of difference at least some master trust executives seem content not to change.

MEMBER ENGAGEMENT The more important point of difference seems to lie in member demographics and engagement, which, according to Hobern, is strongly related to how most members enter retail master trusts.

“A large number of members in retail funds will have gone into it because there was a financial planner who was trying to make sure they had brought all of their super into one place and that it was under advice,” SUPERREVIEW

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he says. “So by definition, those who have a financial planner will be at least indirectly more involved in their financial assets by taking professional advice – and there’s a reasonably high number of people who will at least indirectly have an active interest in their financial affairs.”

Hobern says that with respect to the investment choice and flexibility that has perhaps attracted members to retail master trusts, the vast majority of super funds have the ability to provide choice to some degree.

“And certainly, most super funds are grappling with the process of how they give advice to members as well,” he says.

“Clearly, a master trust like AMP has always associated advice with the product set and we’ve always recommended that people take advice.”

Lewis states the demographics story for retail master trusts more simply.

“Look, I firmly believe that a member’s engagement or interest increases in line with the value of their account balance,” he says. “On average, retail master trusts have a higher average member account balance than their not-forprofit counterparts – but at the end of the day, we do cater for a very diverse range of members by age, by income and by account balance.

“So we have to be cognisant of the fact that we do have a broad membership base, but one that is more engaged and more sophisticated and who wish to avail themselves of the inherent flexibility that we offer in our solution,” Lewis says.

“That’s why we have a large range of investment options to choose from, because the members are more sophisticated

and take advantage of that.”

However, in looking to the future, Lewis says that retail master trusts in general, and Aon Master Trust in particular, are preparing well for the requirements of baby boomers approaching retirement.

“We’re well aware that the average age of our membership is also increasing, so making it easy for members to move from accumulation to retirement phase – making that as easy and as streamlined as possible – is vital,” he says. “Because the notion of hitting a particular retirement age at 65 is, I would argue, one that is well and truly gone.

“Members may phase out of the workforce slowly or they may be knocking down their weekly hours gradually,” Lewis continues. “The concept of a set

retirement age is not what it used to be, so we’re well aware that demands resulting from changed work patterns and flexibility are going to increase, not decrease.

“The one-size-fits-all approach is simply not relevant to Australia’s workforce these days. Solution flexibility and a consultative approach is what is needed.”

From Chant’s perspective, retail master trust members are there not just because of advisers, but because of the adviser proposition.

“I think it’s probably fairer to say that members of retail funds are there because of an adviser, and the adviser’s proposition in many cases is this: they say that where they add value for you is constructing your portfolio and choosing the managers

themselves, and they say they’re very good at that and better at it than the big retail and industry funds,” Chant says.

“Where advisers are putting people into a retail funds, the story is that they’re going to be able to produce better returns for you,” continues Chant.

“And so they need to put their clients into a vehicle that allows a lot of investment choice and there is of course, a cost in that.

“There’s no question that these things are more expensive than the equivalent in an industry fund.”

And for many superannuants, therein lies the issue. Very few average Australians are unaware of the very targeted industry super fund advertising campaigns drawing comparisons between the fees charged

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by each of the industry’s sectors. Time and again it has been highlighted as an important difference but according to Lewis, the reality is that fees are converging.

“The differential in fees is narrowing all the time,” he says.

“The costs for the not-for-profit funds and the pressure on their fees is increasing as they try to build greater flexibility into their offer, and they’re finding that it does come at a greater price.

“But on the other side of the coin, retail master trusts and the Aon Master Trust are no different,” qualified Lewis. “We’re looking all the time to make sure we maximise efficiency and deliver value.”

Lewis says that AON Master Trust uses a combination of member and asset-based fees that provide rebates for larger individual account balances within the personal and pension divisions.

“So our members’ buying power is definitely evident there,” he says. “With employers, we tailor pricing that reflects their particular group buying power and the benefit design of their sub-plan. So based on the benefit design and its level of complexity, we offer a tailored pricing structure.

“But we also review that pricing structure and the level of our fees to ensure that we offer value for money because it’s not just about price,” continues Lewis. “Provided the members see value from the extra flexibility and the extra benefits provided, there’s a value for money proposition to consider.”

For his part, Hobern provides proof that contrary to what many people believe, the fee gap is one that many master

Ultimately, it comes down to the asset allocation of the individual investment option that someone goes into.

trusts had already bridged.

“Our new product, AMP Flexible Super, the core module of that, the ‘set and forget’ strategy, is now cheaper than most industry funds,” he says. “It’s cheaper than eight of the 10 largest industry funds and cheaper than the average of the 10 largest public offer industry funds. Its 65 basis points on an assets under management basis plus a $1.50 per week, and that compares very favourably with pretty much every fund in the marketplace.

Andrew Hobern

“I think what we’re trying to do with our pricing is make sure that we are able to compete for members we may not have reached previously,” Hobern continues. “So people who would otherwise have gone to an industry fund, we now have a competitive offer based on price for those markets, where previously we may have had a bias towards people who sought advice and who I guess were an older age group.”

Hobern says that AMP is attempting to have a relevant offer for everybody in Australia, even if they came into the master trust as an 18-yearold who was working in a retail environment.

“We now have a price competitive offer there and when they need additional features and things like that, they can access it from the same product,” he says. “Sure, it will cost them more but they are paying for what the features are that they’re using.

“So at the bottom level, we’ll compete on price and at the upper level, we’ll compete on features and price, and we’re doing that because we think it’s the right thing for consumers, not because another sector of the industry is advertising prices.”

It seems avoiding talk of the competition that exists between industry super funds and retail master trusts is easier said than done. Fortunately, competition is rarely a bad thing for consumers but despite that fact, Vamos says that the industry has to cease its shortterm focus on returns.

“There are always going to be differences in each fund or master trust’s allocations and, as a consequence, their returns,” she says. “I don’t think that’s going to change and nor do we want it to.

“We’ve got enough issues across this industry as it is and trustees, no matter what sector, must be able to invest longterm in the best interests of their members,” Vamos continues. “That is paramount and ASFA, along with many other parts of the industry, are very very fed up with short-term focuses on returns.

“It’s just not in the best interest of anybody, particularly members – and that’s got to change.”

Looking at performance and the swings between each superannuation sector’s ascendancy, Hobern says that with 72

options on the AMP investment menu, he could guarantee that there would always be one that was outperforming industry funds and another that would be underperforming.

“Ultimately, it comes down to the asset allocation of the individual investment option that someone goes into,” he says.

“They all vary and different markets have different cycles to them, and will have different outperformance, and so on.

“We’ve spent a lot of time over the last 18 months developing what we believe is a market-leading product, something that is relevant for individuals, whether 18 or 65 or 85, something that’s relevant through their employment arrangements, something that’s relevant as an individual and something that’s relevant into retirement,” Hobern continues.

“It’s an all-in-one product because we think it’s the right thing to do to provide something that’s flexible, provides lots of choice for consumers, is competitive in terms of fees and performance and it should show consumers that we are very much committed to being a serious player in the superannuation market and that we intend to compete hard across all Australian sectors.”

Echoing Hobern’s statement, Lewis says that there is no doubt that the retail segment of Australia’s super industry will always be a strong and influential player.

“And that’s primarily because of our member engagement and our ability to innovate and offer new and enhanced benefits,” he says. “There will always be members out there who will value that and who will always be attracted to our segment.” SR AUGUST 2010

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22 NEWS

www.superreview.com.au

Super Review industry drinks S

uper Review celebrated the end to the Cooper Review and the calling of a Federal Election by hosting industry drinks in Sydney in early July.

Managing editor Mike Taylor discussed the direction of the publication and the upgrading of its online offering, the twice-weekly Super Review e-newsletter and its web-site www.superreview.com.au. He told those attending that the enhancements included the provision of an interactive PDF of the print edition to augment its delivery to regular subscribers.

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6 1. Craig Hobart from Tyndall; Mike Taylor from Super Review; Andy Hutchings-Broso from APIR; and Bruce Murphy from BNY Mellon.

2. Jimmy Gupta from Blue Book; Joe Marassa and Stephanie Bolton from ING Investment Management; and Jayson Forrest from Super Review.

3. Martin Carpenter from City Group and Michelle Peterson from Partners Group.

4. Mark Luciano from Pillar and Damon Taylor from Super Review.

5. Ros Lyon from QBE and Russell Mason from Mercer.

6. Bob Luff from APIR and Mark Candy from AUSMAQ. 7. Philip Carmont from ANZ and Jehan Satchi from Super Review.

8. Jayson Forrest from Super Review and Ashley Scott from ANZ.

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Events Calendar

Gribble joins ASFA ASFA has filled one of its key policy roles with the appointment of Jules Gribble.

Super Review’s monthly diary of superannuation industry events around Australia and abroad.

AUGUST NEW SOUTH WALES 9 – ASFA Luncheon. The future of disability: How can we deliver a sustainable system?

Speaker: The Hon. Bill Shorten MP, Parliamentary Secretary for Disabilities and Children’s Services and Parliamentary Secretary for Victorian Bushfire Reconstruction. Venue: The Westin Hotel.

Ballroom, Lower Ground Floor. No. 1 Martin Place, Sydney.

Enquiries: ASFA Member Services Unit. Ph: (02) 9264 9300 or 1800 812 798.

VICTORIA 11-13 – FSC Annual Conference. Venue: Melbourne Convention and Exhibition Centre. 1 Convention Centre Place, South Wharf.

18 – ASFA Luncheon. Gender balance: A highly effective strategy for managing risk.

Speakers: Susan Buckley, managing director, QIC global fixed interest; Deborah Beale, director, ESSSuper. Venue: Park Hyatt Melbourne. Ballroom, Lower Ground Floor. 1 Parliament Square off Parliament Place, Melbourne.

Enquiries: ASFA Member Services Unit. Ph: (02) 9264 9300 or 1800 812 798.

Fax details of conferences, seminars and courses to Super Review on (02) 9422 2822

THE Association of Superannuation Funds of Australia (ASFA) has announced the appointment of former Ernst & Young partner Dr Jules Gribble to the position of senior adviser, policy strategy.

Gribble has 25 years of experience as a consultant, with a keen interest in regulation, research and

JANA Investment Advisers, one of Australia’s leading asset consulting firms, has announced the appointment of Claire Simpson as a consultant within the direct investments team.

Simpson will focus on identifying and reviewing potential investment opportunities together with assisting clients with the ongoing management of their existing unlisted portfolios. She has spent the past four years at Access Capital Advisers and has previous experience at the Commonwealth Bank of Australia and PricewaterhouseCoopers.

Commenting on the appointment, Ian Patrick, chief executive officer of JANA, said: “We are pleased to be expanding this capability in response to demand from our clients with someone of Claire’s calibre.”

SHAN Kwee has joined Omega Global Investors as new portfolio manager and will be responsible for portfolio construction and management, system design and development, attribution analysis and model development and management.

During his career, which spans more than 10 years, Kwee has held roles specialising in quantitative portfolio management and execution, risk management, system development, product and solution development.

“We are very pleased to welcome Shan to Omega Global Investors and expect he will be a fantastic addition to the team,” said Andrew Gruskin, director of investments at Omega.

BNP Paribas Investment Partners has hired Australian fixed income

academia. His areas of expertise include defined benefits, unit pricing and related operational issues.

ASFA chief executive Pauline Vamos said Gribble already has a long list of projects, given all that is happening in the industry, particularly in relation to the Cooper Review. SR

Jules Gribble

In further changes, van Eyk Research’s national accounts manager, Michael Angwin, has been promoted to head of distribution.

Doyle Mallett

investment specialist Doyle Mallett to establish an Australian fixed income investment team.

Mallett brings more than 25 years experience in managing fixed interest and currency investments for some of Australia’s largest institutions, including BT Funds Management and 452 Capital. Most recently, he was head of fixed interest and portfolio manager at Austock Asset Management.

Based in Sydney, Mallet will be responsible for formulating and managing the product offerings of Australian fixed income strategies.

VAN Eyk Research has appointed a new general manager, recruiting Jeff Hall from Macquarie.

As general manager, Hall will be responsible for distribution, investment consulting, product, IT and marketing at the research house. Prior to his appointment at van Eyk, Hall spent five years as a divisional director at Macquarie, including project management work for Macquarie’s financial planning software, Coin.

CLIVE Levinthal has been named head of life insurance for ClearView Wealth, leaving a senior position at CommInsure to take up the role.

Levinthal was most recently general manager, product management, at CommInsure, responsible for both life and general insurance as well as superannuation and investment products. He stepped into his new role on 19 July, joining former CommInsure colleague Simon Swanson.

Clive Levinthal

ClearView has also named Greg Martin as the actuary to ClearView’s life insurance operations and Scott Alomes as head of marketing and human resources.

Martin is a director of KPMG Actuaries and was the 2008 president of the Institute of Actuaries of Australia. SR AUGUST 2010

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ROLLOVER

THE OTHER SIDE OF SUPERANNUATION

August in tropical Melbourne IF it’s August, then it must be time for the annual Investment and Financial Services Association (IFSA) conference.

But in fact, despite nearly 10 months’ of advertising to the contrary, there will be no IFSA conference this year. Instead, the Financial Services Council (FSC) will be holding its annual conference at the same time and at the same Melbourne venue.

Rollover has seen many rebranding exercises undertaken in his time, but he has rarely seen one such as the changeover from IFSA to FSC – something that has seen the organisation changing not only all its corporate livery but also that pertaining to its annual conference.

Changing corporate branding and livery is never a cheap exercise and Rollover can think of a few consultants who have become rich from helping implement such processes. He can only imagine what it has cost IFSA/FSC to get the process all done and dusted in time for the Melbourne conference.

No doubt the whole thing is consistent with long-term strategy, but Rollover thinks it might have been cheaper to have announced the change at the conference and move on from there. SR

Deafening sounds of silence IS it just Rollover, or has the advent of a Federal Election coincided with a pause in the industry super funds’ television advertising campaign.

While Rollover has seen plenty of tit for tat advertising between the major political parties, including some fleeting references to superannuation, he has failed to spot any of the advertise-

ments traditionally associated with the Industry Super Network.

Perhaps those running the advertising campaign have made the assessment that the message risks getting crowded out in the heated environment of election advertising.

There is, too, the risk of industry funds advertising being construed as political. SR

Pedal power ROLLOVER, sadly, does not have a physique that lends itself to lycra and therefore prefers the golfing fairways to the rigours of a bicycle saddle.

Not so former Macquarie banker and now BNY Mellon Asset Management chief Bruce Murphy, who is well known for his devotion to pedal power.

While Rollover has always understood that a good deal of business can be conducted during a round of golf, he had not believed this was possible when pushing pedals up

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a steep incline.

Indeed, it was not until recently breaking bread with Murphy that Rollover learned that a good deal of business can be conducted whilst cycling, albeit that the outcome can be entirely dependent on the fitness of those with whom you are conversing.

It seems Murphy might have been able to discuss the merits of active versus passive investment if only a certain other financial services chief executive cyclist could have kept up. SR

Reading electoral sentiment ON the subject of the Investment and Financial Services Association/Financial Services Council (FSC) conference, it is the first one in a long time that has coincided with a Federal Election campaign. The traditional political cycle means that elections more often coincide with the Association of Superannuation Funds of Australia national conference held in November.

That said, those organising the FSC conference clearly had their eye on the horizon when they developed their speaker lists, with both the Minister for Financial Services, Chris Bowen, and the Shadow Treasurer, Joe Hockey, scheduled to address conference delegates.

Also adding some political flavour will be former Prime Minister Bob Hawke, and one of those supposedly ‘faceless men’ behind the demise of the former Prime Minister, Kevin Rudd, the Parliamentary Secretary for Disability Services, Bill Shorten.

Given the general negativity of some retail funds management operatives towards recent Government policy, the FSC conference is unlikely to be taken as an accurate barometer of electoral outcomes. SR

Got a funny story? about people in the superannuation industry?

Send it to Super Review and you could be raising a glass or two.

Super Review is giving away a bottle of bubbly for the funniest story published in our next issue.

Email editor@superreview.com.au or send a fax to (02) 9422 2822.