When Emergency Services and State Super (ESS Super) ran an open tender for the asset consulting contract of its $1.2 billion accumulation fund, its incumbent provider – Victorian Funds Management Corporation (VFMC) – was absent from the contest.

When ESS Super launched its accumulation fund in 2007, VFMC, the long-term investment services provider for its $15 billion in mainly defined benefit (DB) assets, was given a three-year term as manager of the assets.

But when this contract expired and ESS Super went to market to benchmark VFMC, the manager did not contest its stewardship of the accumulation portfolio because the fund aimed to pursue a post-retirement investment strategy, Michael Dundon, chief executive of the fund, said.

“A lot of our accumulation fund is post-retirement money, which is not an area of great expertise for VFMC,” he said, adding that the accumulation fund was canvassing post-retirement investment strategies, such as lifecycle investing, with its new asset consultant, Towers Watson, and lead advisor Graeme Miller, head of the consultant’s business in Australia.

Dundon ruled out the possibility that the DB component would also be tendered. The fund was mandated by the Victorian Government to invest this capital through VFMC, he said.

Dundon expected the accumulation fund to accrue about $400 million each year as members transferred money across from the DB fund, which requires heftier contributions, or rejoined ESS Super after taking jobs outside the emergency services or public servant sectors.

The fund now conducted investment implementation procedures, such as cashflow management, derivatives and foreign exchange hedging, under investments chief Peter Laity, Dundon said.