Whole-of-fund focus
Selecting managers and striking opportunistic deals are not the most satisfying activities for the team, Hartley says. It’s the way separate investments “hang together” to form a portfolio.
Sunsuper has culled its number of investment options from 30 to 20 as it has grown. The investment team’s performance goals are linked to the performance of each option and the total fund rather than specific investments. “We deliberately view the fund as a whole,” Hartley says.
Its SunTracker program encourages members to consult Sunsuper financial planners to define their retirement savings goals and set plans to achieve them. “Members don’t say they want inflation plus 4 per cent. They want enough savings to buy a caravan when they retire or to get income,” Hartley says. But not all funds share members’ objectives.
“The problem that funds can have is that they focus on a strategic asset allocation as their goal. But you can beat that by a long way and still not meet objectives for members.”
Sunsuper’s administration division, a business unit called Precision Administration Services, compiles member “personas” that group people with common age, income and current super savings of members. The fund provides each group with specific information related to their goals.
“Investment is a really important part of retirement outcomes – but it’s only a part,” Hartley says. “It’s probably more fundamental to have members in the right investment option at the right time. That has a huge impact.”
Internal management
Funds aiming to invest money themselves should thoroughly assess their motives for doing so. Seeking higher net returns is a good reason. Reducing investments costs alone is not. “The focus that you have to have is on returns for members. If you believe that internal management can give you better net returns, you should consider it,” Hartley says. “It can’t be all about fees.”
But funds staffing talented investment professionals risk losing them to competitors offering better pay. “If you have a team that’s doing it very, very well and you’re paying them less than what they can get paid outside, they could use you as a training ground.” Sunsuper has no current plans to insource fund management.
Before joining Sunsuper, Hartley worked as an investment consultant and fund manager at companies including Schroder Investment Management and UBS Global Asset Management. He says a clear contrast between the focus of not-for-profit and commercial funds is clear. “We’re charging members $52 a year plus a basis-point fee. It’s not much. For that they get 20 investment options, zero buy-sell spread, good financial advice and group insurance.”
