Energy Super, Australia’s biggest energy superannuation fund with $3.8 billion under management, is in talks with other funds that may lead to cooperation on investments in order to lower costs.
The discussions with energy funds in New South Wales and South Australia are “confidential” with an eye on the future evolution of superannuation, says Energy Super chairman Bob Henricks.
Henricks doesn’t rule out merging with another fund if the combined fund had lower costs. But he says large superannuation funds “can be a little ungainly” as “people can become a number”.
Funds managing between $10 billion and $20 billion are in a “sweet spot” where they can generate the “most efficiencies but still get the best investment deals,” says Henricks.
Energy Super was created in April as the result of a merger between ESI Super and SPEC Super. The combined funds’ board members will be eight by April 2014, down from 10.
Henricks says the optimum board number for a superannuation fund may be five. Larger boards “tend to spend an inordinate amount of time on peripheral issues,” he says.
He says Australian custodians could “provide a lot better service”. On visits to funds outside Australia Henricks found the service given to them by their custodians was better.
As chair of Energy Super’s investment committee Henricks says he is “strong believer” in external investment managers.
A superannuation fund will getter a broader perspective if it gives several outside fund managers money to manage rather than having an internal investment team, he says.
Energy Super has two investment professionals. Henricks says “80 to 90 per cent” of its money should be managed by external fund managers.
Henricks, who is chair of Energy Super’s investment committee, also likes “active investment management” over passive investment through index funds.
“I firmly believe that in 10 years time people will say we were lucky we were stuck in the stock market,” he says.