Construction and Building Industry Super is looking to merge with other funds to meet changing demographic demands and regulatory changes designed to lower costs.
“We’re open to talking to funds,” says David Atkin, chief executive of Cbus. “We think we have something to offer.”
Mergers among industry funds in Australia are expected to gather pace. Regulatory reforms will produce a more efficient superannuation system while demographic changes mean that superannuation funds need to change to meet their members’ needs, says Atkin.
Cbus manages $17 billion and has about 650,000 members.
Professional Associations Super, the $1.8 billion fund of the recruitment, accounting and retail industries, is seeking to grow through mergers or internal growth, says its chief investment officer, Paul Kessell.
“We are seeking to grow the fund organically or through M&A,” says Kessell. “We want to grow the fund’s economics of scale, lower fees and provide better investment outcomes.”
Recent market volatility following the U.S. sovereign debt downgrade has worried Cbus’ Atkin.
“Our concern is that there will be a knee jerk reaction to market movements,” he says. “We’re long-term investors and I get really nervous about members making bad decisions, something that happened in 2009.”
The superannuation industry is now better at advising its membership, says Atkin.
He says there has been a “spike” in Cbus members calling into the fund following recent falls in global stock markets.
“The industry is proactive at targeting its members who now understand that they can come to us for advice before crystallising losses,” says Atkin. “The message is don’t panic, don’t crystallise losses if you don’t have to.”
CBus has a diversified portfolio of investments that will protect members from losses, he says.
Kessell, who took over as chief investment officer three years ago, has just one other colleague helping him make investment decisions for Professional Association’s 450,000 members.
“We are now in an environment where risk allocation is front and centre,” he says.
Kessell has hedged his overseas equity investments, has a low exposure to unlisted assets, and appointed new fund managers since he took over.
He says in the 12 months to June 30, 2010 the fund had a net return of 10.6 per cent. In the 12 months to June 30, 2011 it had an 11.2 per cent net return.
Cbus has over the 27 years made annual net returns of about 9.3 per cent, he says. Its return in the last 12 months was more than 10 per cent.
Atkin says the superannuation industry “has got to get its head around how to protect its members as they transition into retirement”.
“We must carefully consider changes to the investment mix to provide downside protection,” says Atkin.