Super Review - July

11 COOPER REVIEWDo what you must – not what you can

For the latest news, visit superreview.com.au

12 SR INVESTMENTSDefying market trends to earn their keep

18 ALTERNATIVESRenewed focus on meaning in thewake of financial crisis

3 IFSA REBRANDSIndustry body unveils a new nameand new attitude

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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 F O R T H E S U P E R A N N U A T 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 R Y

Asuperannuation fund’sdelay in processing amember’s rollover re-

quest at the height of the glob-al financial crisis in mid-2008ended up costing him morethan $4,000 on a rolloveramount of less than $24,000,according to evidence given tothe Superannuation Com-plaints Tribunal (SCT).

The evidence given to thetribunal revealed that themember’s application to un-dertake a rollover had endedup taking almost 12 monthsdue to a combination of mis-communication, incompletedocumentation, missing emailsand, eventually, disputationbefore the tribunal itself.

In the end, despite the SCTacknowledging that the errorsand delays had cost the mem-ber more than $4,000 on arollover balance of just under$24,000, the tribunal affirmedthe decisions and actionstaken by the fund trustee.

However, in doing so, the tri-bunal acknowledged thatevents with respect to theRollover request had startedon 18 July, 2008, and not beenconcluded until 2 June the fol-lowing year.

In affirming the decision ofthe fund trustee, the SCT alsoacknowledged the fact that aletter sent from the rolloverfund to the member’s exist-ing fund had taken more thana fortnight to be received. Thetribunal also acknowledgedthe fund’s claim that it had lostan email sent from the mem-ber’s employer – somethingthat generated a further delayof almost three weeks.

In the explanation of its de-cision, the tribunal said it ac-cepted “that the complainantset in motion on 4 July 2008the steps necessary to transferbenefits held with the fundto the rollover fund. The formswere correctly sent to therollover fund from which thenecessary rollover request wasto come to the fund. It seemsclear that the request from therollover fund, together withthe requisite forms, was sentby letter dated 18 July 2008.”

However, it said the fundtrustee had then stated thatthe letter was received by thefund on 4 August, 2008.

“This reflects a gap of 17 daysbetween the date of the letterand the date of its receipt,” theSCT said. “Nevertheless, there

is no evidence on which thetribunal can reasonably con-clude that the letter was re-ceived by the trustee prior to4 August.”

Dealing with the missingemail from the person’s em-ployer and the consequent de-lays which then occurred, theSCT said: “The employer’semail of 22 August 2008 ap-pears to be correctly addressedand it is unusual, although per-haps not unheard of, for anemail to ‘go missing’ in thesecircumstances. Nevertheless,the tribunal is not in a positionto question the trustee’s state-ment that the email was notreceived on 22 August and firstbrought to its attention only on10 September.”

In explaining its final de-termination, the SCT said thecomplainant might have suc-ceeded in minimising the losshe incurred if he provided theinformation requested by the

fund after he had filed hiscomplaint with the SCT.

“Whilst the stance taken bythe complainant in relation tothe trustee’s request for infor-mation and benefit calculationproposal can be understood onone level, it was nevertheless in-cumbent upon the complainantto limit any loss he might havesuffered as a result of thetrustee’s actions,” the SCT said.“Compliance with the trustee’s11 September 2008 requestwould have resulted in his ben-efit being calculated at the unitprice applicable on a date priorto 11 October 2008.”

Acceptance of the subse-quent proposal contained inthe trustee’s 29 October,2008, letter, and provisionof the requested information,would have ensured calcu-lation of the benefit at the 22September, 2008, unit priceof 1.9996, valuing his benefitat $23,345.75. SR

Rollover delays and miscommunication

at the height of the global financial

crisis cost a member nearly 20 per cent

of his account balance, according to

evidence submitted to the

Superannuation Complaints Tribunal.

MANDATES 3 NEWS 3 EDITORIAL 11 SRI 12 ALTERNATIVES 18 APPOINTMENTS 23 EVENTS 23

JULY 2010 Volume 24 - Issue 6

When time is money

JULY 2010 * SUPERREVIEW

By Chris Kennedy

THE Investment and Financial ServicesAssociation (IFSA) has announced amajor rebranding, changing its nameto the Financial Services Council (FSC),effective from next month. It will use theopportunity to take on a much larger rolein influencing broader economic policyin Australia.

“We are stepping out,” IFSA chief ex-ecutive John Brogden said. “This is anopportunity to grow our influence andour commentary from beyond simplythe core areas that we have repre-sented in the past.”

It was important that all the super-annuation bodies and other financialservices bodies spoke with a unifiedvoice, in the same way that the MiningCouncil has, rather than having manydisparate bodies taking their viewsto Canberra, he said.

Brogden stressed that although he

did not have an expansionist agenda anddid not envisage the FSC absorbing anumber of smaller industry bodies, thenew name was deliberately selected asone that encompassed the entire in-dustry and there would have been an op-portunity down the track for other or-ganisations to come under that banner.

Brogden conceded that some of thepolicies the FSC would be advocat-ing – increased migration, an increasein the GST and Australians workingpart time into their retirement – wouldbe controversial.

“We think that a big Australia is acritical part of growing the economy,of sustaining our tax base, of funda-mentally ensuring we don’t become an-other Japan where our population agesand we don’t replace our tax-payingsector of the economy,” Brogden said.

The FSC will be advocating signifi-cant tax reform with respect to the GST,proposing a 15 per cent GST tax rate in

Australia that would eliminate all of the“inefficient and inequitable” state taxes,such as stamp duty, Brogden said.

“We also want to talk about par-ticipation in the Australian econo-my,” he said. “We need to move awayfrom the concept of full retirement.Australians really shouldn’t expect

to retire completely – they should ex-pect to work a couple of days a week.”

It was part of the Australian cultureto work your way up, but scaling backis not part of the national psyche. Bykeeping older Australians working oneor two days a week into their 70s, theywould be extending their retirementincome and massively increasing theadequacy and longevity of retirementfunds, Brogden said.

From a structural perspective, theorganisation will be beefing up its re-search and policy teams and appoint-ing a full-time economist who will beresponsible for the broader issues uponwhich the FSC will comment.

There will be no immediate changeto the board. Brogden anticipated thatoutgoing Perpetualchief executive DavidDeverall would stay on as chairman untilthe FSC’s next annual general meeting inOctober, provided he remained at Per-petual until that time. SR

THE Minister for Financial Ser-vices, Chris Bowen, has vowedhe will not be sitting on the finalrecommendations of the CooperReview into superannuation forvery long.

Interviewed on radio, Bowensaid he would be releasing thefinal recommendations of theCooper Review panel “in the nottoo distant future”.

He said he would be “releasingit quite soon”, and referred to itas being the “third stage” of theGovernment’s reforms to super-annuation – with the first stagebeing the Future of Financial Ad-vice changes, and the secondstage being the changes an-nounced in the Budget.

“The third stage will be our re-forms to the efficiency of the su-perannuation system to get feeslower, and when you put these

three reforms together, we wouldhave over the last few monthscompletely changed the Australiansuperannuation system in a waythat hasn’t been seen since PaulKeating introduced superannua-tion in 1992, and that will be achange for the better,” Bowen said.

While Bowen has not yet re-leased the final Cooper recom-mendations, its content has beenbroadly welcomed by the Invest-ment and Financial Services As-sociation (IFSA) – particularlythe elements that go towards im-proving administration throughonline processing and the useof tax file numbers.

However, IFSA chief execu-tive John Brogden has ex-pressed his organisation’s on-going resistance to the CooperReview’s so-called MySuper de-fault option proposals. SR

THE man who chaired Canberra-based aviationindustry fund AvSuper for around 20 years,David Leggo, has been appointed as the new in-dependent chairman of Telstra Super – the na-tion’s largest corporate super fund.

Leggo will take up his appointment from 1July for a three-year term.

Leggo succeeds David Batrouney, who isretiring after seven years as chair of thefund. SR

www.superreview.com.au NEWS 3

Mandates

John Brogden

SOME superannuation fundmembers may enjoy doubledigit returns for the 2009-10financial year, but many willhave to make do with returnsin the high single digits, ac-cording to SuperRatings.

SuperRatings managing di-rector Jeff Bresnahan saidthat while returns might haveappeared to have been head-ed towards double digits, therecent slump in markets hadserved to dampen the goodnews.

He said super funds had

lost almost 5 per cent in thelast two months, with the re-sult that the median returnfor balanced investment op-tions would be in the order of9.6 per cent.

The SuperRatings datapointed to a five-year medi-an return of 3.7 per cent ayear.

Bresnahan pointed to thefact that the volatility andconsequent uncertainty cre-ated by the global financialcrisis had prompted somepeople to go it alone with

their superannuation, butclaimed that the main-stream funds had demon-strated that diversified port-folios had succeeded inprotecting members fromcatastrophic losses.

He said this could be com-pared to someone who had ei-ther gone it alone or takenadvice to plunge into inter-national shares at the begin-ning of the decade – some-thing that would have seen a$100,000 investment shrinkto just $76,606. SR

Past two months erode super returns

Leggo to chair Telstra Super

Bowen promises promptrelease of Cooper

IFSA rebrands as broader economic commentator

Recieved by Type of mandate Issued by Amount

State Street Global Advisors Australian equities, global equities, global REITs QSuper $10 billion

SuperPartners Administration Austsafe NA

Magellan Wholesale NA $45 million

Perpetual Australian equities NA NA

SUPERREVIEW * JULY 2010

By Chris Kennedy

UNDISCLOSED insurance premiums couldbe leading Australians to pay far more forinsurance out of their super accounts thanthey need to, according to Chant Westresearch.

“The differences in premiums betweenthe cheapest and dearest funds can easi-ly run into thousands of dollars a year,” saidChant West principal Warren Chant.

Although the focus tended to be on ad-ministration and investment fees, insur-ance premiums could dwarf all the otherfees and costs put together, Chant said.

Almost all retail funds include a com-

mission element in their premiums, whichgenerally range from 20 to 30 per cent ofthe base premium, according to the ChantWest report, which analysed death andtotal permanent disability premiums for89 funds – 43 industry funds, 14 publicsector funds and 32 retail funds.

In an example cited in the report, for thesame member the highest premium couldbe 10 times the lowest premium at age50, with the difference increasing to 20times greater at age 60.

Differences like this could decrease amember’s final benefit by tens of thousandsof dollars, according to the report.

“Most members wouldn’t have a clue

whether the insurance premiums comingout of their account represent good valueor not … because the level of disclosure inthe whole area of insurance is so appalling,”Chant said.

The Chant West report recommendednine insurance disclosure standards shouldapply to all super funds.

The report recommended that premiumsbe shown on a fund’s website gross of tax andbased on current age. It also stated thatincome protection premiums should beshown excluding stamp duty, insurance pre-miums should be separated from advisercommissions and examples should be givenin the Product Disclosure Statement. SR

Industry bodies call forcommitment to SG increaseTWO major superannuationbodies have called for theGovernment to maintain itscommitment to proposed su-perannuation reforms afterFederal Treasurer WayneSwan recently acknowledgedthat the reforms would be af-fected by the negotiations withthe mining industry on the Re-source Super Profits Tax.

The Association of Super-annuation Funds of Australia(ASFA) chief executive,Pauline Vamos, and Aus-tralian Institute of Superan-nuation Trustees (AIST) chiefexecutive Fiona Reynoldssaid the proposed phased in-crease in the superannuationguarantee (SG) to 12 per centwas critical to allow the nationto compensate for an ageingpopulation.

Vamos said the gradualtimeframe of the proposed in-crease was prudent as it wouldgive all parties time to build theincrease into wage and salarydiscussions, adding that the SG“is of paramount importanceand ... should remain the cen-tral plank of the Government’ssuperannuation policy”.

Reynolds said the Govern-ment had a clear mandateto deliver its reform package,and that working Australianswould be short-changed intheir retirement if the reformswere diluted or delayed.

ASFA noted research con-ducted by Auspoll that showedmore than two-thirds of Aus-tralians believed the 9 per centSG was not enough to fundan adequate retirement,while an AIST poll foundmore than three-quarters ofAustralian workers support-ed the increase.

Support for an increasedSG was also highlighted byWestpac’s recent announce-ment that it would pay theguarantee on paid parentalleave contributions for itsworkforce, a policy support-ed by ASFA.

ASFA also called on the Gov-ernment to retain all othermeasures relating to superan-nuation announced in the Bud-get to be retained, includingthe tax rebate on contributionsfor low income earners and themaintenance of a higher con-tributions cap for those aged50 and over. SR

Alternatives back in favour with institutional investorsGLOBAL institutional investors in-cluding super funds, endowments,foundations and insuranceproviders expect to increase theiralternative investments exposurefrom 14 to 19 per cent over thenext two to three years, accordingto Russell Investments data.

Real estate, private equity andhedge funds remain the preferredalternative types, although com-modities and infrastructure areexpected to make meaningfulgains from their current low al-locations, according to the Rus-sell Investments 2010 Global Sur-vey on Alternative Investing.

The survey of 119 institution-al investors in North America, Eu-rope, Japan and Australia re-vealed Australian respondents

favoured infrastructure, com-modities and real estate morethan their global counterparts.

“Although most global regionsare increasing allocations to in-frastructure and commodities,they are coming from a very lowbase of between 0.3 per centand 0.7 per cent respectively,”said director of alternative in-vestments, Asia Pacific region,Nicole Connelly.

“Australian investors, on theother hand, have had higher al-locations to these sectors forsome time, providing inflationprotection and portfolio diversi-fication,” she said.

While real estate allocationsin the northern hemisphere haddropped below 5 per cent from

7-10 per cent, Australian allo-cations remained relatively highat 8.7 per cent, having droppedfrom 11.5 per cent in 2003 –partly due to local real estateperforming better during the fi-nancial crisis.

“Alternatives have proved theirrole as portfolio diversifiers andrisk-mitigators during volatile mar-kets, and we expect continued de-mand from institutional investors,even if the global recovery were tofalter,” Connolly said.

Ongoing demand for alterna-tives is expected to drive in-creased use of research consult-ants with a focus on project basedand asset allocation research, anddue diligence on managers andinvestment funds. SR

ESI Super further increases member engagement and adviceESI Superhas seen a huge increase in the Statementsof Advice provided since the fund formalised its sin-gle-issue advice process last year. ESI Super is cur-rently looking to further build its member engagementlevels with a series of educational webinars, accord-ing to chief executive Robyn Petrou.

Commenting on regulatory changes by the Aus-tralian Securities and Investments Commission(ASIC) that allow super funds to provide limitedadvice, Petrou said the changes allowed ESI Superto provide single-issue advice with the sole purposetest to more members. The fund was issuing 59 percent more Statements of Advice since August 2009,she said.

ESI Super planners previously had been busy meet-ing the demand for full advice, but that demandhad been curbed by the provision of single-issue

advice, allowing ESI to expand its advice offering andfocus on younger members who might not have beenaccessing full advice previously, Petrou said.

ESI Super traditionally had a high level of mem-ber engagement (possibly due in part to high memberbalances), but a recent series of informative webinarsand videos had increased that further, Petrou added.

“I did a webinar not long ago on the Federal Bud-get and its impact on our members, and within aweek we had about 244 people hit the website.Not only did they look at it but they went throughthe whole presentation,” Petrou said.

ESI Super also has a large seminar program thatincreased by 21 per cent over the past 12 months,and it is looking at further ways of utilising that pro-gram to engage members and tying it in with theadvice program, Petrou said. SR

Undisclosed insurance premiums eat away super

4 NEWS www.superreview.com.au

Warren Chant

Fiona Reynolds

THE rally in invest-ment markets throughthe latter half of lastyear has been hand-somely reflected inlife insurance indus-try profits, accordingto the latest data re-leased by the Aus-tralian PrudentialRegulation Authori-ty (APRA).

The APRA datashowed that net prof-it after tax for the lifeindustry for the 12months to the end ofMarch had risen by121.7 per cent to$3,150 million, withsome tapering off oc-curring through theMarch quarter.

The degree towhich the recoveryin investment mar-kets propelled prof-itability was revealedby the fact that totalassets for the indus-try had risen by just0.8 per cent to total$234.9 billion.

APRA said that oftotal assets 50.6 percent were invested inequities, 30.1 per centin debt securities, 8.4per cent in invest-ment properties, 7.1per cent in cash and3.8 per cent in otherinvestments.SR

Australians still shunning co-contribution dollarsA MAJORITY of eligible superfund members are failing to takeadvantage of the Government’ssuperannuation co-contributionscheme despite being awarethat they qualify, a survey ofmore than 800 REST Superan-nuation members has shown.

REST chief executive Damian

Hill urged members to ensurethey aren’t missing out onmoney to support themselves inretirement.

“It’s alarming to think thatsuch a large number of Aus-tralians are missing out on a greatgovernment incentive. It’s evi-dent that Australians are fearful

that they won’t have enoughmoney in retirement, so whyaren’t they taking advantage ofthis opportunity?” he said.

A voluntary contribution of$1.50 a day over 30 years matcheddollar for dollar by the Govern-ment could boost a superannua-tion account by up to $37,000, ac-

cording to a projection commis-sioned by REST Superannuation.

“It’s a great way to increasethe retirement money pot forlow-to-middle income earners.What other investment canoffer a dollar back for every dol-lar you put in? It’s too good tomiss,” Hill said. SR

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Asset Servicing | Asset Management



Damian Hill

Lifeprofitsboom


By Chris Kennedy

HOSTPLUS is looking to appoint an-other three full-time financial plannersin Queensland, while an online finan-cial advice tool to be launched short-ly will further increase the fund’s ad-vice offering.

The new planners will bring thefund’s national total to 11, spread acrossall six states. The planners will focus100 per cent of their efforts on Host-plus and will be assisted by pool plan-ners who service industry funds to dealwith any overflows, according to chiefexecutive David Elia.

The new online advice tool, whichHostplus is aiming to launch in July,will be integrated into the product of-fering. Members will be able to accessthe advice tool to receive advice inrelation to investment options, level ofcontributions and insurance coverage,Elia said.

The online advice tool has the poten-tial to revolutionise the industry, Elia said.It will also help free up some of the fund’sexisting financial planners to providemore value-added financial planningservice, while accredited contact centrestaff will provide advice in utilising thetool, he added.

Members would automatically be ableto request changes to their key invest-ment options level of contributions, andto the level of insurance that they areseeking to acquire. The more round-ed advice offering should help en-courage members to become more en-gaged with their super, Elia said.

The Australian Securities and Invest-ments Commission’s guidance relief hasalso provided further opportunities toindustry funds to be able to provide cost-effective within-super advice, Elia said.

Hostplus has recently grown to about960,000 members with 64,000 con-tributing businesses, Elia said. SR

Catholic Super updatesinsurance offeringTHE Australian Catholic Su-perannuation & RetirementFund (ACSRF) has intro-duced changes to its insur-ance offering for members toprovide greater benefits andflexibility without increasingpremiums.

“Australia is one of themost underinsured countriesin the developed world. Wehope these changes will havea positive effect in helping toreduce the size of this prob-lem”, ACSRF chief executiveGreg Cantor said.

The dollar value for eachunit of death and total andpermanent disablement

cover has now increased be-tween 8 per cent and 28 percent, depending on age, withthe cost per unit remainingthe same. Members are ableto choose either age-basedunitised or fixed rate cover,which has also been extend-ed from age 65 to 70. SR

Russell has eye on SMSF trustee and adviser educationRUSSELL Investments aims towork more closely with dealergroups to provide better solu-tions for the self-managed superfund (SMSF) sector.

Russell Investments manag-ing director of retail investmentservices Patricia Curtinsaid thegroup was keen to engage in con-sultation as well as educationpartnerships with dealer groups.

She said the education oftrustees was becoming moreof an issue as the sector con-tinued to grow rapidly. The

SMSF sector is growing by 20per cent per annum, and is setto take over a third of the over-all super sector.

Curtin said that whiletrustees had confidence in theirinvestment decision-making,she questioned whether the ma-jority had the competence. Shesaid education becomes all themore important from the stand-point that asset allocation drives90 per cent of the performanceof a portfolio.

“I would say that this whole

idea of asset allocation is an areathat individual investors, as theyare taking greater control oftheir retirement, need to be con-cerned about,” Curtin said.

She said there was a high con-centration in one or two assetclasses. She added that some ofthe other biases that have beenidentified in SMSFs include apreference for local over glob-al equities, a focus on risk overreturn and a focus on tax ben-efits rather than investmentbenefits.

Curtin said the propensity forSMSFs to invest in a high pro-portion of Australian equitiesand cash has stood them in goodstead over the last few years.

“But is that the right propo-sition going forward?” she asked.“Should they be thinking aboutgreater diversification across allasset classes?”

She said that the SMSF sec-tor had a good compliance trackrecord.

“They seem to be set up forthe right reasons, fee levels are

appropriate and trustees are tak-ing responsibility,” Curtin said.

However, she added that basedon the focus of the various in-dustry reforms, it appeared thatthe Government wanted to seemore trustee education to ensurethat trustees understood theirresponsibility to take controlof their retirement. She addedthat the Government alsowanted to ensure that serviceproviders were compliant, wereexperts in their field and couldbe relied upon. SR

NEW regulations on short form Product Dis-closure Statements (PDSs) are an importantstep forward to a new era in disclosure for fundmembers, according to the Association ofSuperannuation Funds of Australia (ASFA).

“Fund members can look forward to aneight-page PDS rather than 80,” said ASFA

chief executive Pauline Vamos.“This move, and the associated incorpora-

tion by reference provisions, will encourageand enable funds to provide information on-line that reflects the needs of different mem-bers and their stage of life. This is an enor-mous step to integrating education, adviceand disclosure.”

Funds will be able to implement the changesin a cost-effective way with appropriate con-sumer research within the two-year transi-tion period to June 2012, according to ASFA.

Along with the upcoming regulatory changes,the final Cooper Review report and the Gov-ernment’s response to Ripoll, the short formPDS regime helps provide a framework and fu-ture plan for the industry to meet ongoingchanging member needs, Vamos said.

“It will also equip the industry to continue itsinvestment in the whole of the Australian econ-omy for the long-term growth of working Aus-tralians’ retirement incomes,” she said. SR

Hostplus expands financial advice offering


David Elia

Greg Cantor

Pauline Vamos

ASFA welcomes short form PDS regulations

SUNSUPER’S recently inte-grated advice and call centre di-vision will benefit from recent-ly announced changes tointra-fund advice, with the fundalready seeing an increase in ad-vice related calls since the serv-ice was upgraded.

Sunsuper announced inMarch that it had merged serv-ices previously provided by thefund’s call centre and MemberAdvice Centre, and would in-corporate financial plannersfrom the fund’s On Track re-tirement planning team.

The integrated advice andservice centre, where investorscan get general advice in rela-tion to their super, insuranceand investments, had experi-enced a 6 per cent spike in callssince the integration, according

to Steven Travis, general man-ager of member and employerservice delivery at Sunsuper.

Extensions to intra-fund advice

recently announced by Finan-cial Services Minister ChrisBowen are well suited to Sun-super’s On Track program,which fits squarely inside thatextension, Travis said.

“One of the implications willbe that there will be a range of Cand D type clients who will be or-phaned – who will no longer beserviced by traditional plannerswhere planners will have to jus-tify their service model, so I thinkthose C and D clients will migrateto super funds and look to superfunds to provide that advice andfill that gap,” he said.

The changes implemented bySunsuper were made partiallyin anticipation of these changes,which Travis viewed as a big tickfor Sunsuper’s new advicemodel. SR


AIST blastsresources debateAUSTRALIAN Institute ofSuperannuation Trustees(AIST) president GerardNoonan blasted the “narrowand self-serving” argumentsmade by the resources sec-tor in response to the Gov-ernment’s initial ResourcesSuper Profits Tax proposaland increase in the super-annuation guarantee.

“It’s disappointing tocome back from overseasand to listen to the pret-ty sterile and low level de-bate about mining taxes,”he said.

“Just listening to thatdebate, in my view, someof the large and small fibsthat the industry is puttingaround are very disap-pointing, and in a lot ofways very childish.”

He added that the re-sponse from mining compa-nies was reminiscent of theway large oil and tobaccocompanies around the worldhad tried to bully govern-ments over the years, andwas taking the focus awayfrom the increase in the su-perannuation guarantee

from 9 to 12 per cent.“[The debate was]

clearly crowding out thespace for what I think isa major reform for Aus-tralia’s economic structurethat hasn’t been givenproper attention,” he said.

Noonan described thelifting of the guarantee aspossibly the best idea theGovernment had put forthin 10 years. He said thatwhile the 9 per cent guar-antee had put Australia ina great economic position,the system was being im-paired by not having takenthat extra step.

With help from a 2 percent tax cut offered by theGovernment, businessshould be able to absorbthe increase in the superguarantee over the next 10years. The end result willbe that by 2020 Australiawill have the world’s lead-ing retirement income sys-tem, Noonan said.

“There’s no other coun-try that goes near it and it’ssomething that is reallyworth doing,” he said. SR

Aussie banks pass stress testBy Chris Kennedy

STRESS testing within majorbanks globally was revealed tobe vastly inadequate duringthe global financial crisis, butAustralia’s majors haveemerged largely unscathedand with a far better under-standing of what is requiredfrom internal stress testing forthe future, according to Aus-tralian Prudential Regula-tion Authority (APRA) chair-man John Laker.

In a speech to the AustralianBusiness Economists, Lakersaid the crisis itself was far

more severe than the scenariosthat were tested and stress-test-ing practices globally were re-plete with weaknesses.

“Growing recognition of theneed for robust stress test-ing means banking institu-tions around the globe areseeking to enhance … theirstress-testing frameworks andpractices, and a number of su-pervisors have now conduct-ed their own industry-widestress tests,” Laker said.

Based on discussions betweenAPRA and Australia’s majorbanks following a self-assess-ment of the banks’ compliance,

several areas of better practicehave been identified – as well asareas for improvement.

Laker said that stress-testingscenarios applied at an enter-prise-wide level were typical-ly well communicated withininstitutions. He added thatstress-testing scenarios wereupdated on a regular basis andwere responsive to the chang-ing economic environment; andat the enterprise-wide level, arange of risks other than cred-it risks were considered and po-tential correlations betweenrisk classes were recognised inthe aggregation process.

Further development couldinclude the extension of regu-lar stress-testing regimes to themore detailed portfolio andproduct level, and upgradinginformation and IT systems tosupport stress-testing exercis-es and reduce pressure on re-sources, he said.

“APRA’s recent stress-test hasprovided important evidencethat the Australian banking sys-tem has the capital resourcesto weather an economic con-traction much worse than thatexpected during the depth ofthe global financial crisis,”Laker said. SR

ING opens Wollongong super operationTHE Federal Government has congratulated INGfor opening a new superannuation and invest-ments operation centre in Wollongong, NSW.

The Minister for Financial Services, ChrisBowen, said the new centre reflected the ca-pacity of the financial services industry to con-tribute to job creation in Australia.

He said the centre would support an addi-tional 250 jobs over the next three years and

would bring the centre’s workforce to 600 in theIllawarra.

Bowen said the ING centre would predomi-nantly focus on operational administration andcall centre roles.

The opening of the ING centre in Wollongongfollows Pillar Administration’s commitment tothe Illawarra region as the home of its call cen-tre and administrative activities. SR

Advice changes suit Sunsuper’s new model


Steven Travis

John Laker

Aon solution helps superfunds with compliance


By Chris Kennedy

AON Australia has launched a cus-tom-designed governance, risk andcompliance solution for superannua-tion funds to help ensure their frame-works are up to speed in the wakeof more stringent regulations.

Aon Consulting’s Governance, Risk& Compliance solution assessesfunds against expectations set byregulators and industry best prac-tice, and provides examples of wherethey need to improve, such as mon-itoring programs, policy documen-tation, risk management assessmentand the efficiency of the board.

The solution also offers assistance inmaking the necessary improvements.

For example, Aon’s technology arm,Aon e-solutions, provides risk man-agement software, according to AonConsulting principal and actuaryJenny Dean.

“Governance and risk managementbest practice is constantly evolving.Members are also demanding a high-er standard of corporate governancefollowing the global financial crisis.They’re now far more aware of theirretirement savings and want to makesure they are safeguarded,” she said.

“Superannuation funds impose highstandards of governance on the com-panies they invest in. If you’re im-posing those sorts of standards, youhave to make sure your own affairsare in order.” SR

SELECT Asset Management’s Alterna-tives Portfolio has been added to AXA’sNorth platform as well as Colonial FirstState’s FirstWrap.

The portfolio has exposure to a num-ber of global and local alternative strate-gies, including hedge funds and man-aged futures, as well as alternative assetssuch as infrastructure, private equity,commodities and precious metals, according to Select.

“We are seeing strong demand for [theSelect Alternatives Portfolio] from a largenumber of dealer groups and platformswhich recognise that trying to pick in-dividual alternative investments is fraughtwith potential reputation and compliancerisk,” said Select Asset Management chiefexecutive Andrew Fairweather.

Partnering with a firm like Select totake care of manager selection and port-folio construction was a smarter way toaccess alternatives, he said. Select wasone of the few alternatives funds not tolimit or close redemptions during theglobal financial crisis, he added.

The Select Alternatives Portfolio, whichwas launched in 2004, already appears ona number of platforms and wraps in-cluding Asgard, Navigator, MLC Mas-terkey Custom and Macquarie Wrap. Itis available for investments of more than$25,000. SR


CHANGES proposed bythe Cooper Reviewmean super funds willneed to configure back-office systems in orderto accommodate MySu-per and reduce cost andcomplexity to members,according to BravuraSolutions.

Offering a low-cost op-tion means funds will wanta low-cost operation tomanage it, putting the focuson streamlining systems

and shaving unnecessarycosts, according to DarrenStevens, Bravura Solutions’

global head of product –wealth management.

“Electronic processes,real-time processing andstraight-through-pro-cessing are going to moveto the top of the list of pri-orities for super systemselection,” he said.

“Providers are going towant flexible software so-lutions and will need tomove quickly to takethese new products tomarket.” SR

MySuper will require cheaper operating systems

Select addedto AXA andCFS platforms

Andrew Fairweather

APRA pursues trustee victimisation chargesTHE Australian Prudential Regula-tion Authority (APRA) has initiated ac-tion against a former executive direc-tor of the Queensland Retail Tradersand Shopkeepers Association(QRTSA) over alleged victimisationof superannuation trustees.

The regulator announced that IanFrank Baldock had been committed tostand trial on two charges of victimi-sation laid under section 68 of the Su-perannuation Industry (Supervision)Act, which makes it an offence for a per-son to commit an act of victimisationagainst a responsible officer of a cor-porate trustee of an employer sponsoredsuperannuation fund.

The Brisbane Magistrates Court hasbeen told that it will be alleged Baldockvictimised two trustee directors of a su-perannuation fund linked to the QRTSAand that he caused both individuals –a QRTSA employee and the auditor ofthe QRTSA – to suffer a financial detri-ment by terminating their employmentfor simply carrying out their obligations.

The fund involved was named as theAustralian Enterprise Superannua-tion Fund, which at the time had as-sets of approximately $90 million and21,000 members.

APRA took action to protect theinterests of members of the fund lastyear. SR

Darren Stevens


By Chris Kennedy

GESB is urging Australians to seek ad-vice to ensure self-managed super funds(SMSFs) are suitable for their circum-stances after national research demon-strated that many Australians don’t un-derstand the time, risks and costsinvolved in operating a SMSF.

More than half of Australians thoughtit was appropriate to establish a SMSFwith a balance of $50,000 or under, andone-quarter thought a balance of $5,000would be appropriate, according to a na-tional survey of 1,100 people conductedby TNSon behalf of GESB in March 2010.

SMSFs with $50,000 or less in as-sets would have average annual oper-ating expenses of 5 to 6 per cent of theirtotal assets, while a $5,000 balancewould be eaten up in the first year of

operation, according to Cooper Reviewfindings quoted by GESB.

The growth in SMSFs suggested Aus-tralians wanted to exercise more controlover their super, or felt that account feescharged by the major super providerswere too high, according to the generalmanager of wealth management atGESB, Fabian Ross.

“Access to the information requiredto manage super does not equate to hav-ing the ability to interpret or apply thisinformation in an effective and efficientway to ensure an adequate income inretirement,” Ross said.

“Our research shows that only a thirdof people would consult a professional fi-nancial adviser to decide how suitablea SMSF is for their individual circum-stances. People need to understand thatthe control they are seeking could come

at the price of greater risk, cost andpersonal commitment.”

There appeared to be a perceptionamong Australians that they can de-liver better returns than a full-timesuper fund investment team, althoughthis was unlikely unless the individualwas taking on significantly more riskor getting lucky, Ross said.

While Australians appeared to havea good grasp of some of the technicalrisks associated with SMSFs, manyfailed to appreciate the obligations oftrustees or so-called ‘lifestyle’ risks, theresearch showed.

Individuals needed to take into ac-count factors such as the time and moneyassociated with administering a SMSF,and whether they would have the de-sire and ability to manage the fund in thelong term, according to GESB. SR

Aberdeen saysrecovery not ‘normal’ABERDEEN Asset Management haswarned that the current recovery is farfrom normal and that there remain noquick fixes.

Aberdeen senior investment specialistStuart James said his company’s con-tinuing caution was built around globalmarket volatility stemming from the eu-rozone sovereign debt crisis, concernsover China’s property market and thepace of the US recovery.

He said these illustrated that global fi-nancial crisis (GFC) related fiscal and mon-etary packages were only a partial fix.

“While Aberdeen has always held a morecautious view of the ‘recovery’ outlook thanmany others, the current state of world mar-kets confirms that, despite the nine-monthbounce we’ve experienced from stimulusmeasures, there is no quick fix for the un-derlying structural imbalances and other is-sues that led to the GFC,” James said.

However, he said the global equities out-look was not all gloom and doom, with op-portunities still existing for investors witha long-term view and an eye for quality.

James said fears of an imminent burst-ing of the China bubble were premature,emerging markets continued to offerroom for growth and the US economy wasturning around.

He said that Aberdeen believed it was astock picker’s market, with the upside ofvolatility being mispricing. SR

Death benefit complaints risingTHERE was an upturn in complaints lodged withthe Superannuation Complaints Tribunal (SCT) dur-ing the March quarter, with most of the increase beingowed to concerns about death benefits.

The chair of the SCT, Jocelyn Furlan, said that dur-ing the quarter the total number of written complaints re-ceived by the tribunal increased by 0.5 per cent comparedto the previous quarter, while the number of telephoneenquiries actually declined by 15.9 per cent.

She said complaints about death benefit distributions

had increased to 37.1 per cent of all complaints received,while the complaints relating to fund administration hadremained stable at 48.2 per cent.

Furlan said 18 determinations had been issued dur-ing the quarter and that, overall, the SCT had affirmedthe trustee’s decision in 72.2 per cent of these cases.

She noted that while 100 per cent of death bene-fit distribution cases had been affirmed, only 50 percent of disability and administration cases had beenaffirmed. SR

Group insurance needs defined approachGROUP insurance product developersshould not simply copy retail productdevelopers by adding “bells and whis-tles” to group vanilla type insuranceproducts, according to the AIA chiefdistribution and marketing officer,Damien Mu.

Speaking at an Association of Su-perannuation Funds of Australialuncheon in Melbourne, Mu hit outat the industry’s tendency to addfeatures to insurance products “forthe sake of adding them on” at theexpense of the rest of the super fundmembership.

“We are seeing the convergence be-tween group and retail insurancein the last few years ... and what I callthe ‘retailisation’ of group insurancewith bells and whistles,” Mu said.

“We need to make sure that weare not just adding on things forthe sake of adding things on, andlooking to address the specific

needs of one individual at the ex-pense of the rest of the member-ship,” he said.

Mu warned that proper researchneeded to be conducted to under-stand the cost involved of prod-uct development.

“We all know when it comes tosuper funds, we make smallchanges to products that can havesignificant [impacts on the cost]of systems, cost of processes andresources, cost of disclosure,” he said.

“We need to innovate, but let’smake sure that we are adding truevalue to the group insurance of-fering and not just try copy what’shappening in other areas,” headded. SR

GESB urges Australians to get SMSF advice


Fabian Ross

Damien Mu


www.superreview.com.au EDITORIAL 11

Doing the doable

Irrespective of submissions tothe contrary and abundantevidence that market forces

have generated their own dy-namic, the chairman of theCooper Review, Jeremy Cooper,has remained wedded to the no-tion of industry consolidation.

Thus, as the Governmentmulls over the recommenda-tions contained in Cooper’sfinal report, it will be present-ed with a stark choice. It canpursue policy initiatives thatgive impetus to further con-solidation or, more sensibly,it can allow normal market dy-namics to prevail.

In making its decision, theGovernment should not allow it-self to be distracted by Cooper’srather simplistic rationale: thedesirability of scale. Rather, itshould look at the consolidation

that has occurred within the su-perannuation industry over thepast decade and the relativeperformance of funds.

The number of superannua-tion funds operating in Australiahas diminished substantiallyover the past 10 years, but whilemega-funds such as Aus-tralianSuper have certainly per-formed well, their absolute scalehas not delivered them sub-stantial outperformance.

What is more, it would bewrong to assume that Aus-tralianSuper had been success-ful simply because it has becomevery large. Its success has beendriven as much by synergy as byscale, proving that the best su-perannuation fund mergers areborn of mutual interest and de-sire rather than government pol-icy prescriptions.

Anyone who has closelymonitored the complex mat-ing rituals that normally pre-cede superannuation fundmergers would know thatmany such efforts are still-born, floundering on the rocksof competing egos and com-peting interests.

In a speech delivered ear-lier this year, Cooper discussedthe desirability of Australiahaving fewer but larger su-perannuation funds in the con-text of them being able to com-pete for the ownership ofmajor assets. He did so by ref-erencing the Canadian pen-sion funds that sought controlof the Australian infrastruc-ture giant, Transurban. How-ever, there would be many whowould argue that, irrespectiveof a fund’s scale, such a largeinvestment in a single compa-ny would not be in the best in-terests of members.

Equally, there are many in theAustralian superannuation in-dustry who have good reason toargue that their members wouldgain little from entering into amerger with another, largerfund. Why would the trusteeboard of a fund that returned itsmembers 15 per cent last fi-nancial year feel compelled tofind a merger partner in the in-terests of gaining scale?

Perhaps just importantly,why should those sametrustees be compelled to seeka merger just because a Gov-ernment has, arbitrarily, setsome sort of minima with re-spect to membership andfunds under administration?

While Australia has a numberof under performing funds(which, it might be hypothe-sised, would perform better if

they were the subject of amerger), no one seems to havesuggested that consolidationbe forced on the basis of in-vestment performance. If thatwere the case, then the formerdarling of the ratings houses,MTAA Super, would have to beincluded in the mix.

Given the Government’sCabinet changes and the factit is moving towards an elec-tion, its interests would bebest served by taking a prag-matic approach to the Coop-er recommendations anddoing the sensibly doable –while discarding the disrup-tively conceptual.

On that basis, it is eminentlysensible for the Governmentto adopt the recommendationsthat go towards simplifyingand improving the superan-nuation back-office through e-commerce solutions, elec-tronic funds transfers and theuse of tax file numbers.

However, a much moremeasured approach needs tobe adopted towards theCooper Review’s recommen-dations with respect to theMySuper default proposals,and towards further industryconsolidation.

A Government bruised by itsarguments with the mining in-dustry would be most unwiseto further unsettle superan-nuation industry investors asit seeks re-election. SR

Only some of the recommendations of the Cooper

Review are worthy of adoption by a Government seeking

re-election. The rest should be consigned to the dustbin

of policy hypothesis.

Mike Taylor

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Given theGovernment’s Cabinetchanges and the factit is moving towards

an election, itsinterests would be

best served by takinga pragmatic approach

to the Cooperrecommendations.


12 SOCIALLY RESPONSIBLE INVESTMENT www.superreview.com.au

Superannuation fundsare continuing to backresponsible investment

options, not just because oftheir commitment to under-lying principles, but becausethey are generating compet-itive returns.

That is the assessment ofthe president of the Respon-sible Investment Associationof Australia (RIAA), DuncanPaterson, who foresees con-tinuing growth in the sector.

“The RIAA releases an an-nual report called the Bench-mark Report, which looks atthe size of the responsible in-vestment sector in Aus-tralia,” he said. “It looks athow well responsible invest-ment funds have performed,and for the financial crisisand the period immediatelyprior, it has shown that theaverage responsible invest-ment fund has beaten thebenchmark across all of thecategories chosen.

“Obviously one might pointto a particular product and saythat one is doing better thananother because of ESG [en-vironmental, social and gov-ernance] issues, but taken asa whole, responsible invest-ment products perform com-petitively,” Paterson contin-ued. “The best way to put itis that there’s no evidence

that implementing ESG cri-teria into your investmentprocess harms returns in theshort, medium or long term.

“So if there’s no evidencethat it harms returns, whywouldn’t you do it.”

KNOWLEDGEBut despite delivering per-

formance that is increasing-ly being recognised by assetconsultants and fundtrustees alike, there remainsignificant gaps in the knowl-edge and research around re-sponsible investment, andPaul Harding-Davis, head ofdistribution for AustralianEthical Investment, is quickto point out that it goes be-yond the ESG issues tradi-tionally referred to.

“One of the areas of re-sponsible investment that’sgetting a lot more attentionover the last three years, andthe global financial crisisbrought it into focus further,is actually engagement withcompanies.

“So yes, identify the risksand opportunities comingfrom ESG issues, but bear inmind that ethical funds havebeen doing that sort of workfor a long time,” Harding-Davis continued. “We, as abusiness, have been doingit since 1986, but we’ve also

been committed to, and thissector has been a leader in,shareholder engagement aswell.”

Similarly, Paterson saidthat if investors wanted totake a serious approach toresponsible investing, theywere going to have to do anumber of things beyondsimply basing their invest-ment choice on the ESG cri-

teria they were interested in.“You need to form a view

about the interests of stake-holders in the process,” hesaid. “If you’re looking tomarket the product accord-ing to its ESG credentials thequestion is, do you representa group of, for instance, su-perannuation funds thathave got particular attitudestowards ESG criteria that

would need to influence yourdecisions.

“So taking a broader or-ganisational approach to re-sponsible investment is partof the process [as well as]thinking about actively en-gaging with the companiesyou’re investing in,” Patersonadded. “There’s a need tocommunicate with themabout the sorts of things you

While many predicted responsible

investment allocations would be

squeezed as a result of the global

financial crisis, relative

outperformance has ensured their

future, writes DAMON TAYLOR.

Earning their keep

www.superreview.com.au SOCIALLY RESPONSIBLE INVESTMENT 13


think are relevant from anESG perspective.

“It’s certainly about muchmore than simply applyingthe ESG criteria to invest-ments and leaving it at that.”

Providing the super fundperspective, Mark Delaney,chief investment officer forAustralian Super, said that thefocus of investment had to beon getting the best possible

return for members.“Good responsible invest-

ing, [that considers] addi-tional non-financial issues(including ESG issues), mit-igates against the risk ofcorporate scandals, fraudand potential litigationagainst a company,” he said.“The community’s recognitionof a genuine commitment tocorporate governance can

enhance the reputation ofthe company and raise gen-eral confidence.

“It makes that companymore attractive to share-holders, employees andprospective investors.”

Alternatively, commentingon whether definitions in theresponsible investment spacewere part of the knowledgegap that existed, Paterson

said that people allowedthemselves to get more con-fused than they needed to beabout what constituted a re-sponsible investment.

“The finance sector as awhole is replete with slight-ly confusing definitional is-sues, and the responsibleinvestment sector is no dif-ferent,” he said. “What isimportant is that partici-pants in the financial serv-ices industry up-skill them-selves in terms ofmethodologies for the ap-plication of ESG criteria.

“One of the key initiativesthat’s happening in thisspace is the launch of the Re-sponsible Investment Acad-emy, which is something thatthe RIAA is doing, and one ofthe key aims of that is to doaway with some of the mis-conceptions about responsi-ble investment and the ap-pearance that it might beconfusing or misleading,” Pa-terson continued. “It reallyneedn’t be because whilethere are different method-ologies that are used for re-sponsible investment, thesame can be said for anyother space in the invest-ment sector.

“It’s just a matter of know-ing what those are.”

DEFINITIONS Proving the point of con-

fusion, Delaney said thatwhile Australian Super hada clear view of what consti-tuted a responsible invest-ment, terminology continuedto be a problem.

“Australian Super believesresponsible investment isabout considering all those‘non-financial’ issues thatcan impact the long-term

asset value, and that in-cludes ESG issues,” he said.“But the terminology used isstill a source of confusion.

“For instance, people arestill using the terms ‘ethical’and ‘sustainable’ inter-changeably,” Delaney con-tinued. “At the heart of thisis a lack of understanding ofthe different underlying se-lection approaches, includ-ing negative and positivescreening and best of sec-tor investing.”

For his part, Harding-Davis suggested that part ofthe definitional confusioncame from the fact that re-sponsible investment was areasonably broad church ofinvestments.

“If you go to the RIAA web-site, you’ll find what I thinkis a good basis for an indus-try-wide definition for re-sponsible investment,” hesaid. “Essentially, responsi-ble investments differ fromother investments becausethey have systematic ways oftaking into account ESG andethical issues within their as-sessment process.

“Of course, they also differfrom each other in the wayin which they do that,” Hard-ing-Davis pointed out. “Somepeople use avoidance or neg-ative screening, some peopleseek positive opportunitieswhere you look for thingsthat have a positive impactand there’s also an invest-ment sector approach, whereyou seek to allocate capitalto the best behaved in eachsector.”

According to Harding-Davis, though knowledge andresearch around responsible

Continued on page 14 ☞



investments is growing, thatknowledge remained patchy.

“In the retail sector wehave a very committedclient base who are aware ofthese issues, but they tend[to be people] who are veryenvironmentally and so-cially aware,” he said. “How-ever, there are a lot of peo-ple in the community whodon’t know that you can, infact, invest your money inthis way, and then there’sanother group who actuallythink that you have to giveup performance.

“You do get a different per-formance,” Harding-Daviscontinued. “And there areclearly times when we’ll un-derperform and times whenwe’ll outperform, and thosetimes will always be differ-ent when compared withother mainstream funds.

“But over the longer termnearly all of the academic re-search paints a pretty com-pelling picture that you don’tgive up performance wheninvesting responsibly.”

Of course, the relativeyouth of responsible invest-ment within Australia doesnot alter the fact that it is anarea of investment that isof great interest to retail andinstitutional investors alike.In the wake of the global fi-nancial crisis, the policy as-pects of all investments arebeing examined very care-fully and, according to Hard-ing-Davis, a focus on ESG is-sues is likely to be a part ofthat.

“I think that you’ve got anumber of things working in

tandem now,” he said. “In theinstitutional area, the Unit-ed Nations Principles for Re-sponsible Investment hasraised a significant degree ofawareness and Australialeads the world per capita insignatories.

“I think there’s no ques-tion that if anybody had anydoubts that paying atten-tion to governance, busi-ness ethics – things likeselling off inappropriateproducts or misaligned in-centive schemes – there’sno doubt that these thingsactually carry with themsignificant risk,” continuedHarding-Davis.

“When everything’s goingsmoothly you don’t really no-tice them, but there’s anevent dimension to it, andwhen things go badly theyjump off a cliff.

“It’s certainly a lot easi-er to have a discussion withpeople now about the im-portance of good gover-nance and ethics post theglobal financial crisis thanit was previously.”

GOVERNANCEDelany said that since the

global financial crisis the keyarea of increased focus hasbeen governance.

“But there are other re-sponsible investment con-siderations that have beenhighlighted as well,” he said.“We believe that companiesthat have a genuine com-mitment to effective corpo-rate governance practicesare better positioned to an-ticipate and respond to mak-ing strategic business deci-sions in to changingeconomic, ESG conditionsthat impact on the company.

“Well governed companiesseek to maximise long-termvalue for the company and itsshareholders and are mind-ful of its position in society.”

Interestingly, Patersonsuggested that a renewedfocus on the investment pol-icy that came with respon-sible investing might be asmuch a result of public per-ception as it was of lessonslearned during the global fi-nancial crisis.

“I read a very interesting re-port that was on Reuters theother day regarding a Japan-ese pension fund which an-nounced that they were tak-ing into account ESG issuesbecause people had lost faithin the investment process,” hesaid. “The fund’s name wasRENGO and it said that itwas ‘preparing to incorporateESG factors into the invest-ment decisions of its mem-ber pension schemes as itwas a way of regaining trustin investment’.

“I thought that was very in-teresting because it’s post

global financial crisis andpeople want to know that in-vestors are taking their re-sponsibilities seriously,” Pa-terson continued. “And oneway of conveying to yourclient base that you are tak-ing these issues seriously isto give the client an under-standing that you care aboutthe sorts of things that theycare about.

“It’s a way of connectingwith your clients and com-municating with them at alevel beyond simply thebottom line of the financialreturns.”

Speaking to the super in-dustry specifically, Patersonsaid that there was a rangeof different risks thattrustees needed to be con-scious of if they were notconsidering responsible in-vestment.

“The most obvious one iscomparison to peers,” hesaid. “With the onset of theUnited Nations Principles forResponsible Investment, a


☞ Continued from page 13 It’s certainly a loteasier to have adiscussion with

people now aboutthe importance ofgood governance

and ethics post theglobal financial

crisis than it waspreviously.

Duncan Paterson

Paul Harding-Davis

Earning their keep



very high proportion of su-perannuation funds in Aus-tralia are becoming signa-tories and those funds thathaven’t may well be asked‘why’ by their members indue course.

“But becoming a signatorydoesn’t make the problem goaway,” Paterson added. “Theprinciples are set up so thatthe requirements for signa-tories ratchet up over time,so it’s not one of those thingsthat you can just sign on toand never do anything about.

“It’s structured in such away that people who sign onwill have to demonstrate intime that they are takingESG issues into account inthe way that they managetheir investments.”

More tangibly, Patersonsaid that he was seeing in-vestors globally starting torecognise that there was animpact on the bottom line re-turns of companies depend-ing on how well they man-aged ESG risk.

“The obvious example atthe moment is the BP[British Petroleum] oilspill,” he said. “My organi-sation has a lot of researchabout the sorts of [occupa-tional health and safety]risks that were developingfor BP, and that informationis available right now to in-vestors in Australia.

“Again, there is not a goodunderstanding about thequantity and the quality of in-formation that is out there onESG issues,” Paterson con-tinued. “There’s not a lot ofreason why superannuation

funds shouldn’t be takingthese issues into account ina practical sense.

“There’s plenty of infor-mation and sources that theycan go to.”

QUALITYYet while there is ample

reason for super funds tolook to responsible invest-ments, there is still the ques-tion of quality. Responsibleinvestment options are faroutweighed by their main-stream counterparts, so ischoice in terms of qualitystill too narrow?

The answer, according toHarding-Davis, is not anymore.

“There really is a broadchurch of responsible in-vestments out there,” hesaid. “From mainstreamfunds that are saying thatwhile they weren’t respon-sible investors originally,they actually think lookingat ESG factors is a sensiblething to do, to more special-ist responsible investmentfunds.

“There’s quite a rangethere, particularly in the eq-uities space, for investorsto choose from, and they’reall incorporating ESG crite-ria into their processes.”

Echoing Harding-Davis’sentiments, Paterson saidthat responsible investmentchoice was wide enough thatit didn’t need to be an ob-stacle for those superannu-ation funds looking for prod-ucts in the area.

“I think that there is someongoing resistance amongstthe rating agencies, but ifasset consultants aren’t ableto come up with a reasonable

range of responsible invest-ment products then thetrustee should be asking whythat is,” he said. “Becausethere are a number of prod-ucts out there – both fromsmaller niche players and alsofrom mainstream players.

“A smaller niche playermight be someone like Aus-tralian Ethical Investment,which has been around foralmost 20 years now and hasa long history in this space,or you could be looking at amainstream player like AMPor Perpetual.”

Providing a contrast to theviews of Harding-Davis andPaterson, Delaney indicatedthat while there are a num-ber of options and ap-proaches to responsible in-vestment, the exclusion ofcertain industries was a sig-nificant factor.

“Australian Super hasthree sustainable investmentoptions: Australian sustain-able shares option, an inter-national sustainable shares

option and a sustainable bal-anced option,” he said. “Thebalanced option is identicalto our mainstream balancedoption apart, from the equi-ties components.

“Each of the sustainable op-tions invests in equities thathave been selected on thebasis of best of sector sus-tainability criteria,” Delaneycontinued. “And one of thereasons we take that best ofsector sustainable approachover an ethical screening ap-proach is the variation inwhat may be considered anethical company.”

Delaney said that an in-vestment universe with eth-ical exclusions was neces-sarily limited simply becauseentire industry sectors wouldnot qualify.

“Australian Super has 1.4million members from allages, walks of life and em-ployment backgrounds andthe idea of what is an ethi-cal company and what is notwill vary widely between

members,” he said. “But thatnarrower investment universealso has a higher probabilityof volatility.”

VOLATILITY Naturally, the volatility re-

ferred to by Delaney is a keyissue here. The dangerseems to be that when timesget tough and stability be-comes an issue, funds mightstop paying attention to re-sponsible investment issuesand/or drop their ESGscreens entirely.

However, Harding-Davissaid that he had seen no ev-idence of that happeningthrough a financial crisisthat was one of the mostchallenging many investorshad ever witnessed.

“I don’t see it having hap-pened, and given some of theperformance numbers I’veseen through that time, theindications are that therewere some pretty effectiveperformances through thatperiod,” he said. “The sector,

☞ Continued from page 14

Earning their keep

www.superreview.com.au SOCIALLY RESPONSIBLE INVESTMENT 17


from what I can see on bothan average and with respectto some individuals, did rel-atively very well.

“In fact, I’d say that the ar-gument has become morecompelling that it was exact-ly the wrong time to overlookresponsible investments.”

Alternatively, Patersonsaid that while he had seenevidence of responsible in-vestments being neglected inbroking houses, he had notseen the trend go furtherthan that.

“Prior to the global finan-cial crisis, a number ofbroking houses invested inan ESG capacity within theirorganisations, but it seemedas though that ESG capacitywas the first to be sacrificedwhen cost cutting camealong,” he said. “But havingsaid that, we haven’t seen re-sponsible investment prod-ucts shut down as a result ofthe global financial crisis inAustralia.

“I don’t think the droppingof ESG screens or attentionto these issues is a massiveissue, but what is importanthere is that increased degreeof professionalism when itcomes to approaching re-sponsible investment issuesin the mainstream financesector,” Paterson continued.“It’s important to understandthat the different types ofmethodologies in responsi-ble investment are going todeliver different types ofvariance in return, differenttypes of risk, different bal-ances over time and at dif-ferent phases of the market.”

As an example, Patersonsaid a very deep green fund

manager that excluded in-vestment in the mining sec-tor was always going to un-derperform when the miningsector was doing well andperform better when themining sector faltered.

“However, I think the fi-nance sector can improve itsdegree of professionalism inthe way it considers thesethings,” he said. “At the mo-ment, it’s asking for very sim-ple solutions. At the moment,people are saying ‘just give mea [responsible investment]product’ and they aren’t wor-rying about the characteris-tics of the responsible invest-ment component.

“They just want to say it’sa Responsible Investmentproduct because it’s badgedthat way, but in reality that’snot the way things work andit would be great to see someslightly more sophisticatedquestions being asked.”

ADAPTING RIAt this stage, there seems

to be little doubt that re-sponsible investment re-mains in a period of growthand, as such, investors’ un-derstanding of the area isevolving. Where responsibleinvestments were perhapsonce a periphery concern forsuper funds, the challengenow is how best to fit theminto portfolios.

Paterson said the super in-dustry was already seeing arange of different approach-es being taken by individ-ual super funds.

“We’re seeing VicSuperadopt a whole-of-fund ap-proach to responsible in-vestment, which is applying

across all of their invest-ments, and that is obvious-ly a very committed way ofdoing it,” he said. “We’re alsoseeing a lot of superannua-tion funds signing up to theUnited Nations for PrinciplesResposible Invstment I butbeing quite tentative aboutwhat the next steps are goingto be.

“The methodologies thatare going to be used by superfunds are going to differ ac-cording to the nature of theirbeneficiaries, according tothe nature of their size andtheir own structure and,from my perspective, it’s fas-cinating to see how they’redeveloping.”

Paterson said he also ex-pected there to be a lot moregrowth in the structuring ofmandates.

“That’s the area wheresuper fund trustees reallyhave a direct and immediateimpact on the processes beingused by fund managers,” hesaid. “At the moment, a lotof questions are being asked

of fund managers as to howthey’re incorporating ESG,but we haven’t seen an awfullot of inclusion of the re-quirements regarding ESGcriteria going into mandatesand feedback going to fundmanagers about the qualityof ESG integration as well.”

Offering the fund per-spective, Delaney said thesuperannuation industry waschanging and that incorpo-ration of ESG issues wouldundoubtedly become morecommon in the future.

“Interest in sustainable in-vestments is gradually build-ing and we are continuing torefine our investment choiceoffering to respond to mem-ber demands in this area,” hesaid. “As always, however, ourwork in this area involvesbalancing the needs andwishes of those who havetaken up sustainable optionswith the bulk of memberswho remain in our defaultbalanced option.”

Harding-Davis said that ir-respective of how super fundsfit responsible investmentsinto their portfolios, the sim-ple fact is that it is still anarea for improvement.

“If ESG issues are to be-come a matter of course forinvestors, it will require theallocation of more thoughtand resources to make surethat they are actually in-corporating it into theirday-to-day investment man-agement,” he said. “Some ofit is a bit like an iceberg:we’ve seen some commit-ments but there’s still a lotof work going on behind thescenes – and not all of it isvisible yet.” SR

If ESG issues are to become a matter

of course forinvestors, it will

require theallocation of more

thought andresources.

Mark Delaney


18 ALTERNATIVE INVESTMENTS www.superreview.com.au

If there is one category ofassets that continues toreceive closer examina-

tion in the wake of the glob-al financial crisis (GFC), itis that of alternative invest-ments. Composed of assetsthat, in many circum-stances, were considered ei-ther volatility insurancepolicies or countercyclicalto equities, the reality was

that a number of these so-called alternatives failed todeliver the diversity their in-vestors were expecting.

As a consequence, trans-parency, governance and liq-uidity are all top of mind,but according to Joe Brack-en, head of macro strategiesat BT Investment Manage-ment, investors would bewell advised to look closely

at what defines an alterna-tive investment within theirportfolio.

“Oddly enough, definitionsmatter more these days thanthey did in the past,” hesaid. “In the past, people re-ferred to alternatives as ba-sically anything outside ofequities and bonds, so in-vesting in timber or infra-structure, private equity,

Alternative investments remain at front

of mind for many superannuation fund

trustees but, as DAMON TAYLOR

reports, the global financial crisis has

served to create a greater focus on what

‘alternative’ really means.

Looking for a real

alternativewww.superreview.com.au ALTERNATIVE INVESTMENTS 19


managed futures – they’reall alternatives.

“Now that was a fine defi-nition and that was okay re-ally until the GFC,” Brackencontinued. “Out of the GFC,people have really started tosay, ‘Hang on, what is actu-ally in my alternatives buck-et? What do I mean by al-ternatives?’. Now they’reapplying a slightly stricter

definition in saying that al-ternatives are typically ab-solute return strategies thatare uncorrelated with bondsand equities and have vary-ing degrees of liquidity.

“When investors talkabout alternatives, that’s re-ally what they mean now.”

Clarifying Bracken’s defi-nition further, Ken Marsh-man, head of investmentoutcomes for JANA Invest-ment Advisers, said whetheryou called it alternatives orsomething else, what wasimportant was the under-lying risks and returns.

“The biggest thing aboutalternatives, and what real-ly makes them alternative,is probably that they’re un-traded – or at least not trad-ed in the same way thatother assets are,” he said.“That’s a critical point. Theother aspect that defines analternative is that you ex-pect the underlying funda-mental drivers of returns,and risks to those returns,are different from yourmajor asset classes.

“They would be the twodefining characteristics ofalternatives, and then thequestion of how much to al-ternatives or not is really ir-relevant,” Marshman added.“What’s important is howmuch you want of those un-derlying risks in a portfo-lio and how well you knowthose risks.

“So the third element ofalternatives is getting a re-ally good handle on thoserisks, and that’s more diffi-cult because they’re new.”

Yet with respect to keepingalternatives allocations bal-anced and proportional andthe relevance of definitions

in that pursuit, Greg Nolan,general manager of invest-ments for industry fund CareSuper, said that it was moreimportant to worry aboutwhat was growth and whatwas income in the return.

“That’s the most impor-tant thing, but the need tokeep portfolios balancedbrings in another aspect,and that is liquidity,” hesaid. “That’s something wefocus on because there hasto be a balance.

“We’re long-term in-vestors, so we’re focused onassets that give us that long-term risk/return profile,”Nolan continued. “But we’vealso got to be cognisant ofliquidity and balance thediffering requirements ofour investments.

“One is obviously longterm and the other is shortterm.”

POINT OF DIFFERENCEOf course, the balancing act

referred to by Nolan and howwell super funds have man-aged it has had a very real im-pact on returns post GFC. Al-ternatives exposure hasalways been a point of differ-ence between super funds,and for Bracken, individualfund performance is likely tohave reflected that.

“The point of differentia-tion seems to be in termsof the amount of alterna-tives exposure funds mayhave,” he said. “Some superfunds tend to be very, veryconservative indeed andwould have a 2 per cent or 3per cent maximum in alter-natives.

“Others see the diversifi-cation benefits completelyand are 10 per cent, 15 per

cent, 20 per cent into alter-natives and typically, eventhrough the GFC, the ab-solute return funds did a lotbetter than your standardequity fund,” Brackenadded. “They might havedropped a little or indeednot at all – and some ofthem actually made money– whereas the typical equi-ty fund dropped about 50per cent.

“So clearly, alternativesexposures would have madequite a big difference.”

Marshman said the otherside of the alternatives coinlay in funds’ preparedness totake on the risk of variousalternative investments.

“If you want to strip itbare, some funds decidedto take on more liquidityrisk within their portfolio,more regulation risk with-in infrastructure, risk with-in property or the risk ofappointing successful man-agers in hedge funds,” hesaid. “But whatever thatrisk is, I think that thoserisks are quite differentfrom the risks of owning eq-uities or different styles ofequity management.

“They are a significant dif-ferentiating point and ob-viously those portfolios thatdidn’t have a lot of these lessliquid alternatives sufferedgoing into the GFC, but havebounced back post GFC.”

DISAPPOINTMENT Unfortunately, not all al-

ternative investments per-formed as predicted withinthe environment of tight liq-uidity that was created by theGFC. A number of investors,


The biggest thingabout alternatives,

and what reallymakes them

alternative, isprobably that they’re

untraded – or atleast not traded inthe same way thatother assets are.



both institutional and retail,were disappointed by hedgefunds in particular, but ac-cording to Marshman, thatdisappointment was more aproduct of circumstance thanthe returns being delivered.

“Hedge funds, on the faceof it, disappointed investorsbecause it was expectedthat they would deliver pos-itive returns in almost everyenvironment,” he said. “Butin a period where peoplewere scrambling for cash,good assets had to be sold ina hurry, and that led to arapid drop in the valuationof those assets.

“Furthermore, some ofthese assets didn’t have easyliquidity, which meant thatthe price fell further than itshould have,” Marshmancontinued. “However, it’s afact that for the entire pe-riod of the GFC and the re-covery, hedge funds haveoutperformed those bal-anced structures of normalbalanced liquid assets;they’ve outperformed whatwould be a diversified port-folio of bonds and equitiesthrough that whole period.”

Marshman said hedgefunds had suffered largely be-cause they had not lived up toinvestors’ expectations.

“But in saying that, they’veactually outperformed themainstream investment ap-proaches, and I’d go furtherto say that in the biggest liq-uidity crisis we’ve had in 80years, the limited default ofthose funds is quite remark-able, particularly given theway they’re structured,” hepointed out. “To be honest, Ithink they’ve stood one of the

hardest tests of all time.” Similarly, Nolan’s assess-

ment of hedge fund per-formance was that they hadbeen significantly impactedby investor sentiment.

“From my understandingthere was more to it thanstructure and currency move-ment,” he said. “My belief isthat some of the trades werecrowded trades – they werebased on leverage – and atthe fulcrum of the crisis peo-ple were trying to sell every-thing, and particularly thequant-based strategies justcouldn’t get out.

“It was like everyone wasrushing for the same doorand only a limited numbercould get through.”

Months down the track,with liquidity concerns eas-ing somewhat, Marshmansaid investors in the hedgefund space had learnt toknow precisely what theywere investing in.

“I think people havelearned that the term ‘hedgefund’ is a broad grab bag – alabel that covers a widerange of different invest-ment strategies,” he said.“And I think what the GFC

has taught investors and in-vestment advisers is thatpeople need to understandthe nature of the hedge fundthat they are buying whenthey are buying it.

“Experience has shown usthat some of these assets hadquite a high correlation withequities, where others hadquite a low correlation withequities,” Marshman contin-ued. “People have to workout what it is that they re-ally want to buy when they’reacquiring these styles of as-sets or these styles of in-vestment management.”

☞ Continued from page 19 Hedge funds, on the face of it,disappointed

investors because itwas expected thatthey would deliverpositive returns in

almost everyenvironment.

Looking for a real alternative

www.superreview.com.au ALTERNATIVE INVESTMENTS 21


LIQUIDITYProviding a point of com-

parison to the hedge fundscenario, Bracken said thatby focusing on the avail-ability of liquidity, BT’sGlobal Macro fund had beenunaffected by the rest of themarket’s liquidity concerns.

“When we put togetherthe Global Macro fund in thefirst place we adopted thisidea of what we call ‘TLC’,which is not actually tenderloving care but insteadtransparency, liquidity andcontrol,” he said. “So on thetransparency side, we made

sure that we put into Glob-al Macro investments thatwe understood, that wecould explain to other peo-ple and that we were com-fortable with.

“But more importantly, onthe liquidity side, we only in-vest in instruments that giveus daily liquidity, so futuresand forwards, that’s all,”Bracken continued. “Wedon’t do options, we don’t docredit, we don’t do over-the-counter stuff, nothing likethat – it’s all liquid, ex-change-traded futures andforwards.

“So during the GFC weweren’t impacted at all byeither shorting bans, liq-uidity constraints, margincalls, nothing like that, andthat was by construction.”

Bracken said that with re-spect to control, the aim wasto exercise good risk control.

“We have pretty sophisti-cated risk managementtools and risk measurementtools,” he said. “Measure-ment so that we know whatour risk is but managementso that if we think our riskis getting out of hand, wecan cut our positions veryquickly.

“For us, the real problemduring the GFC was thatthere was only really one betin the market, and that wasto buy US dollars and thenbuy US treasuries,” Brackenadded. “That was it. You ei-ther got that bet right or youdidn’t. And really, that’s avery difficult environmentto be in because if there’sonly one bet in the entiremarket, most people willhave taken it and it’s goingto be very difficult to makemoney.”

ILLIQUIDITYNaturally, the alternative

investments story was aboutmore than liquidity. On theother side of the coin, theilliquidity of infrastructureassets gave investors muchmore stable returns, but ac-cording to Marshman, theywere not immune to some ofthe more poignant lessonsdelivered by the GFC.

“By and large, infrastruc-ture did have more stable re-turns, but the GFC has cer-tainly exposed some methodsof investing in infrastructurethat were not at all stable,”he said. “What we’ve seen isthat the assets themselveshave been very resilient – theports, the roads, the airportsthemselves.

“The revenues have tend-ed to come through and thecosts have been controlled,”Marshman continued. “Butwhat has happened is thatthe highly leveraged in-vestments in infrastructurehave been hurt quite sig-nificantly and some of thevery highly geared assetshave produced worse re-turns than those thatweren’t as highly geared.”

According to Marshman,that was particularly thecase for those assets thatwere in the middle of majorrefinancing when bankswere shrinking their lendingbalance sheets.

“The lesson out of theGFC in infrastructure is tobe very cautious of the ex-tent of leverage,” Marshmansaid. “The underlying assetsare sound, but the way inwhich the capital structureof those investments is es-tablished is critical.”

For Nolan, the relative

success enjoyed by infra-structure assets was driv-en significantly by investorattitudes in other parts ofthe market.

“The market was driven toa large degree by sentimentand fear during the GFC,” hesaid. “And when things arepriced by the minute andday by day, there’s plenty ofscope for sentiment or thatfear to take hold.

“But when you’re dealingwith infrastructure assetsthat are real assets forwhich revenue over the longterm is driven by economicgrowth, the situation is a bitdifferent,” Nolan continued.“There aren’t the tradesgoing through on a dailybasis, so there’s obviouslya lot more stability there.

“It’s just a function of themnot being pushed around byshort-term sentiment.”

RISK MANAGEMENT Taken as a whole, moves

within alternative invest-ments post GFC seem to betowards risk management interms of liquidity, trans-parency and governance.Most people knew that somealternatives would sufferduring a period of tight liq-uidity, but Marshman be-lieves shrewd investors arefirmly set upon policychanges that will protectthem from similar circum-stances in the future.

“Right across the boardthis question of liquiditymanagement is top of mind,”he said. “That need to avoidoverextension into less liq-uid assets or assets thatcould have significant cash


They’ve actuallyoutperformed the

mainstreaminvestment

approaches, and I’dgo further to say

that in the biggestliquidity crisis we’vehad in 80 years, the

limited default ofthose funds is quite

remarkable.

drawdowns is now hardwired into the processes andthinking of most superan-nuation funds, and that isthe significant change.

“Step number two in termsof the hedge funds space isthat we now have the under-standing and learning as tothe different characteristicsof hedge funds,” Marshmancontinued. “There will be achange in direction aboutwhat other assets they’re re-placing in a portfolio, so ifthey’re being used to replacedebt then you’ll want a dif-ferent structure than if they’rebeing used to replace equitiesor property or something.

“As an industry, we’ve got amuch better understanding ofthe role hedge funds shouldplay in a balanced portfolio.”

In the infrastructure space,Marshman said anything high-ly geared with fee structuresthat encouraged higher lever-age were also out.

“Around the rest of theworld, they might want totake those,” he said. “But Ithink in Australia we’ll seea huge resistance to invest-ing money in highly lever-aged assets where the pro-moter or the manager orwhoever is highly incen-tivised to accelerate thatleverage and pass the risksoff to the investor.”

Bracken suggested thatchange within alternativeinvestments would not justbe about policy but alsoabout the way investorsviewed individual assets.

“It’s odd that people aresaying that concern overliquidity has eased,” hesaid. “To be honest, when

I speak to both superannu-ation funds and to advisersand individual investors, thefirst thing that they talk aboutand indeed the fifth thing thatthey talk about is liquidity,about how they never want toget into products that havequarterly liquidity or yearlyliquidity, and how having dailyliquidity is fantastic.

“So that’s something thatreally hasn’t changed, evenmonths down the track – liq-uidity is still the most impor-tant thing on peoples’ minds,”Bracken added. “The secondthing that’s changed, howev-er, is that before the GFC peo-ple just assumed that Aus-tralian equities in particular,but equities in general, wouldalways go up.

“The GFC very quicklyshowed that not only do eq-uities not always go up butthat they can always fall,and they can fall very, veryquickly, and over the spaceof a couple of months youcan unwind all of the goodwork that was done over anumber of years.”

For Bracken, the wake upcall for many investors hadbeen the realisation thatthere was a huge amount ofrisk in putting too much ofan investment portfolio intothe stock market.

“It kind of reinforced forpeople the idea of diversi-fication,” he said. “That youactually need to have morediversified portfolios and in-deed these absolute returnproducts that aren’t linkedto benchmarks and that tryto preserve your capital asmuch as possible.

“In an odd way, the GFChas been rather good for usin that it’s altered peoples’

value for the risk that wasalways there but they neverrecognised.”

Looking to the future andwhether the composition ofsuperannuation funds’ al-ternative investment allo-cations were likely to seemeaningful change, Marsh-man said the key lay inrecognising the lessonslearned during the financialcrisis as well as how currentmarket trends were impact-ing various assets.

“The advice we’re giving isthat we think that these al-ternatives, for want of a bet-ter term, have proven them-selves through the GFC ifproperly executed,” he said.“There are two other pointshere too. One is that thereis a shortage of availablefunding at the moment, somany of these so-called al-ternatives are ripe – they’rereally ready at the moment.

“Secondly, the debt over-hang is a significant issue forsome of the non-alternatives,”Marshman continued. “Sowhether you’re looking at therisks of inflation or the risksof deflation, some of the tra-ditional assets look highly un-certain right now.

“We think some of these al-ternatives represent a goodmanagement strategy to dealwith that uncertainty.”

For his part, Bracken pre-dicted that the alternativeinvestment focus movingforward would be on ab-solute return strategies.

“To be honest, I find it dif-ficult to believe that peoplewill forget the fact that theylost 50 per cent through theGFC, and even now that mar-kets have rebounded, they’restill nowhere near the levelsthey were at,” he said. “To me,when I look at investors’ be-haviour, they’re now ex-tremely reticent to put all oftheir money in to the equitybasket and just go for it again.

“The lessons of the GFChave been learned and goingforward people will be farmore interested in havingproducts that offer daily liq-uidity,” Bracken continued.“They’ll be far more inter-ested and attentive to howrisk is managed and they’llbe far more interested in notjust having the same old eq-uities and bonds but alsohaving some absolute returnfocus as well.”

Bracken said that at theend of the day, if an investorgave him $100 and he gavethem back more than that$100, he had done a good job.

“And obviously, if I do abad job, I’ll be giving themless than that $100 back,” hesaid. “It’s really all about ab-solute return.

“It’s not about benchmarks,it’s not about relative return,it’s about absolute return andbuilding your wealth, and Ithink people are going to befar more attentive to thatgoing forward.” SR



The GFC very quicklyshowed that not only

do equities notalways go up but

that they can alwaysfall, and they can fall

very, very quickly,and over the space

of a couple ofmonths you canunwind all of the

good work that wasdone over a number

of years.

☞ Continued from page 21

Ken Marshman

Looking for a real alternative


www.superreview.com.au APPOINTMENTS 23

A CONSOLIDATION of BT Invest-ment Management’s (BTIM’s) cash,credit and fixed interest resourceshas seen the appointment ofVimal Gor as head of income andfixed interest.

Prior to joining BTIM in No-vember 2009, Gor spent the pre-vious 10 years at Aviva Investorsin London, where he was respon-sible for the management of theGlobal Aggregate Bond portfolios.

BTIM’s chief executive officer,Emilio Gonzalez, said it waspleasing that the best person iden-tified for the role was an inter-nal candidate.

COLONIAL First State GlobalAsset Management (CFSGAM)has appointed Andrew Cumminsto the role of head of global proj-ects and strategy.

Cummins joins the businessfrom Macquarie Bank, where hewas division director, MacquarieSecurities Group. His previous ex-perience also includes being a keymember of the management teamsat BlackRock in the United King-dom and Europe.

Reporting to CFSGAM chief ex-ecutive officer Mark Lazberger,Cummins will lead the develop-ment and execution of all majorbusiness critical projects withinthe global CFSGAM and FirstState investments businesses.

Commenting on the appoint-ment, Lazberger said: “Andrew isan extremely experienced and tal-ented professional with a verystrong project management andoperations background.”

JANA Investment Advisers hasannounced a number of appoint-ments that increases the size ofits investment team to 48.

Domien Beckers is joining theportfolio construction researchteam, where he will be involved inboth research and client work,while Ann Marco joins the firm ina quantitative analyst role, havingpreviously worked at NationalAustralia Trustees.

Brendan Donohoe has alsojoined JANA in a senior leadershiprole to lead business developmentand specific projects.

JANA also welcomed back MaryPower earlier this year. Power wasthe head of property research

prior to joining Warakirri AssetManagement.

MERCER has announced the sen-ior appointments of Brian Long andLuke Fitzgerald, both former vanEyk employees, to roles in whichthey will provide advisory and re-search services to financial planningorganisations, private banks andplatforms.

Long has more than 25 years ex-perience in investment banking, in-vestment administration and cus-tody, investment research andproduct distribution. He will leadthe wealth management team inAustralia and New Zealand.

Fitzgerald will also join Mercerin a senior consulting role, focusingon national financial planning deal-er groups. He has a business devel-opment and distribution backgroundwithin a variety of industries in bothAustralia and New Zealand. SR

Australian Ethical has an-nounced the appointment ofJames Jordan as its chief in-

vestment officer, replacing MartinHalloran, who left the organisa-tion at the end of June.

Jordan initially joined the firmas an equities analyst in 2006and currently holds the positionof head of research.

Australian Ethicalchief executive

Phillip Vernon said he is pleasedwith the appointment: “James hasbeen a key part of the investmentteam for a number of years and ishighly respected both internally andexternally.”

Prior to joining AustralianEthical, Jordan worked as asenior economist with variousdepartments of the FederalGovernment. SR

Australian Ethical’s new CIOEvents Calendar

Super Review’s monthly diary ofsuperannuation industry eventsaround Australia and abroad.

JULY

VICTORIA

7 – ASFA Luncheon. Speakers: Ministerfor Financial Services, Superannuationand Corporate Law and Minister forHuman Services Chris Bowen MP and thechair of the Review into the Governance,Efficiency and Structure and Operationof Australia’s Superannuation System,Jeremy Cooper. Venue: Park HyattMelbourne. 1 Parliament Square (offParliament Place), Melbourne. Enquiries:ASFA Member Services Unit. Ph: (02) 9264 9300 or 1800 812 798.

23 – ASFA Comms 10 Forum andAwards. Host: Comedian Peter Berner.Venue: Crown Conference Centre,Melbourne. Enquiries: ASFA MemberServices Unit. Ph: (02) 9264 9300 or1800 812 798.

QUEENSLAND

19 – ASFA Golf Day. Venue: North LakesGolf Club. Bridgeport Drive, Northlakes.Enquiries: ASFA Member Services Unit.Ph: (02) 9264 9300 or 1800 812 798.

James Jordan named as replacement forMartin Halloran.

Vimal Gor

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

James Jordan

Luke Fitzgerald

ROLLOVER T H E O T H E R S I D E O F S U P E R A N N U A T I O N

Follow the leaderTHERE are some in the superannuationindustry who are clearly cynics when itcomes to politics.

Rollover has no other explanation forthe people who suggested that the Min-ister for Financial Services, Chris Bowen,would be rewarded for his support of theascendancy of the Prime Minister, JuliaGillard, and the fall from power of for-mer Prime Minister, Kevin Rudd.

It appears their assessment was almostentirely based upon television coverage of

the tumultuous events in Canberra inwhich Bowen was apparently seen walk-ing in close proximity to Gillard.

That being the case, these people musthave made the opposite assessment of theAssistant Treasurer, Nick Sherry, who wasseen to be walking in close proximity tothe dethroned Prime Minister.

If careers are to be built or broken basedupon the people with whom you brushshoulders, Rollover will understand ifLabor politicians choose to avoid Rudd. SR


ROLLOVER wonders whetherthere is going to be more thanjust a name change over at theInvestment and Financial Ser-vices Association (IFSA).

As all readers should nowknow, IFSA has been renamedthe Financial Services Council(FSC) with its chief executive,John Brogden, suggesting itwill be taking on a wider poli-cy and lobbying brief.

In those circumstances,Rollover wonders whether thenext step for IFSA/FSC will bea shift from its current officesin mid-town Sydney to the

somewhat more sterile North-bourne Avenue in Canberra.

A Canberra headquarters hasalways been a prerequisite forindustry organisations with se-rious lobbying aspirations, butRollover wonders whether thefundies sitting on the IFSA/FSCboard will be comfortable mak-ing the commute.

Still, a Canberra base makesa handy launch pad for thosewith Federal political aspira-tions – even if the electorate inquestion is in Sydney’s north-ern beaches. SR

The cold heartof politics THE award for helping the media in ex-

tremis must surely go to the pres-ident of the Responsible In-vestment Association ofAustralia (RIAA), Dun-can Paterson.

Rollover hears that Pa-terson went to extraordi-nary lengths to partici-pate in a roundtableexercise conducted bySuper Review’s sister pub-lication, Money Manage-ment, including closetinghimself in the darkenedrecesses of a building.

It seems that while themajority of the roundtableparticipants were sitting

comfortably in Sydney, Paterson and Aus-tralian Ethical’s Paul Harding-Davis di-

alled into the conference fromNew Zealand.

But while Harding-Daviswas participating from thecomfort of his hotel room, Pa-terson found himself on the goand using his mobile phoneamid the clatter of a busyWellington cafe.

With the cafe noises servingto overwhelm all other con-versation on the conferencecall, Paterson was all consid-eration, politely exiting theeatery and bravely ensconc-ing himself in a dark, but rea-

sonably silent, corridor. SR

A merry-go-roundtable

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