One of the two owners of FuturePlus Financial Services, the $6 billion Local Government Super (LGS), has resolved to sell its stake in the services provider while also recruiting up to 40 of its staff members.
LGS decided to sell its 50 per cent stake in FuturePlus to co-owner, the $2.5 billion Energy Industries Superannuation Scheme (EISS), following a review of its strategic relationships, Peter Lambert, chief executive officer of LGS, confirmed.
The fund initially offered to buy EISS’ half of the business, Lambert said, but its bid was not accepted. FuturePlus was judged to be worth about $10 million in a valuation by PricewaterhouseCoopers last year.
It provides investment support, administration and financial advice services relating to about $9 billion in assets. This includes member services and administration for its super fund owners, and the implementation of EISS’ investment strategy. It also services the Chifley Investment Fund.
But LGS grew less dependent on FuturePlus’ investment strategy team after hiring its own chief investment officer in 2008 and then some of the service provider’s investment staff. Now the fund is searching for an environmental, social and governance specialist, Lambert said.
LGS would retain FuturePlus for back-office investment services, such as rebalancing and cashflow management, and administration and para-planning for at least the next three years, after which a “full tender process” would test the incumbent provider.
However, from next week, LGS will offer jobs to about 40 FuturePlus staff, including about 12 of the company’s 18 financial planners, to its member services, marketing and product design departments.
“We’re looking at ensuring that the components of the business that we want to take control over will be properly transitioned and that we can agree on a suitable contract for remaining services,” Lambert said.
“These are all functions that we feel are critical to our business, and therefore we should have direct control of.”
EISS would issue a press release this week outlining its plans for FuturePlus now that it faced the possibility of losing staff in the near future, and the certainty of competing for the back-office services contract of its largest client in the coming years, fund secretary Tony Butcher said.
After certain FuturePlus staff members decide whether to accept offers to join LGS, and FuturePlus’s ongoing revenue stream is established, the company would be valued by an external party and a sale price negotiated with EISS, Lambert said.
In its strategic review, LGS resolved not to merge with sister fund EISS or any other funds in the foreseeable future. This followed an unusual episode in December 2009, in which LGS claimed that EISS had secretly liaised with the NSW Treasury to approve the merger of the two funds. One of LGS’ sponsoring unions, the United Services Union, dubbed the proceedings the ‘Treasury super hijack’.