In his seventh year as chair of Catholic Super in Victoria, Peter Bugden can comfortably say he’s witnessed notable growth in the fund. What first began in 1971 as a niche offering to Catholic school employees is now an Australia-wide public offer fund, with around $5 billion under management following a period of growth – and a merger.
The merger, with the National Catholic Superannuation Fund (NCSF) two years ago, was a major turning point for Catholic Super. Its funds under management had stood at $3.7 billion, and its membership base was limited in its demographic reach. NCSF brought in $600 million to $700 million of funds under management and a membership base that matched Catholic Super’s of 35,000, thereby extending Catholic Super’s national coverage to achieve “quite significant memberships in each state”.
“That brought members from the health and aged care sectors to our fund,” says Bugden. “We’d been education by and large up until then.”
With approximately 70,000 members, just over 3000 are pensioners and 5000 are employers. Bugden says the employer figure varies upwards each month – there are another 4000 non-participating employers (meaning they haven’t contributed for a period of 60 days).
Its largest membership is still in Victoria and Bugden says the fund remains primarily within the Catholic education sphere. Between 70 and 75 per cent of its members are women.
The board is still focused on growth, including potential opportunities on the back of Stronger Super. More specifically, Bugden says Catholic Super is “seeking interest” from smaller funds that aren’t applying for the MySuper licence to decipher whether there’s scope for their restructure.
Bugden says it’s “sort of a merger”, but might fall under a master trust arrangement structure. “We’re talking to a number of funds in relation to that. It’s early days, so it may not happen, but that’s one idea we’ve got.”
Also front of mind for the board is what the super industry will look like in several years’ time – more specifically, in terms of their service offerings. There will be fewer funds, says Bugden, offering more services.
“We’ll have to. And we’re looking at, as some other funds are, what the services are that you might offer to your members in terms of financial, like banking services and credit facilities, and all those sorts of things. I can’t give you any announcements yet, but we’ve certainly done a fair bit of work on it.”
Catholic Super has a fairly open and transparent process in board selection, according to Bugden, who says it’s a point of difference to other funds. “…We are not like any other super fund in that there is not a major employer who sponsors the fund,” Bugden says.
The board of 10 trustees is selected by election, not appointment, with five elected by employers and five by members. “The fund’s directors are nominated by any of the thousands of employers who then elect a director from those nominated.
Similarly, the union nominates a candidate, along with others who may be nominated by other members, and then all the members may vote for the member-elected director.”
The union-nominated candidate may or may not be elected (but usually has been), adds Bugden.
Given the directors are all elected rather than nominated, and none are appointed by either a union or a sponsoring employer, Bugden says the board would consider itself independent.
However, he flags concerns about the definition of independence. In particular, to be truly independent, and one of the “one third” that the Coalition has signalled it will enforce if elected to government, there is a requirement that a trustee not be a member of the fund.
“At the moment, that is one of our requirements of our directors, that you can come from anywhere, we’re an open fund, anyone can stand provided you’re a member. Because the view that we take is if you’re a member, then you’re going to have a fairly clear focus on doing the best you can for your members, because you’re one of them,” Bugden says. “And to impose the one-third under that sort of definition of independence I think is pretty restrictive, and I think it’s an ideological matter really, because the same is not going to be asked of retail funds.”
Moreover, Bugden says it’s an issue for the wider industry.
“The industry’s got to really work hard to fight that. I don’t really think that’s the current government’s view. It’s more the coalition’s view.”
As for board composition, Bugden says the board tries for balance in terms of diversity. For the most part, the board has had a 60/40 gender ratio. At the moment, it’s a 70/30 ratio – seven men and three women, an imbalance Bugden says the board is trying to address in its next election.
Bringing expertise to the table
Catholic Super’s board has five sub-committees, each of which includes two or three directors: insurance; audit, risk, remuneration, and investment management.
The latter is perhaps the largest group, drawing on the expertise of three board directors, the chief executive officer, chief investment officer, an asset consultant, two external consultants and several investment team members. It has a two-day meeting each year at which it considers the fund’s performance and recommendations for the board in relation to further strategies.
Bugden says it’s a fairly expert group, noting that when electing members to the board, they search for skill strengths.
“We do our best to nominate candidates for election with the skill sets we require at the time and if necessary we supplement any deficiency by appointing professionals to relevant committees.”
The investment group has the task of determining and appointing fund managers within the strategy the board has set, a responsibility the board has delegated to it.
This allows swift change when needed, says Bugden.
“If we need to move fairly quickly, we can; we don’t have to wait for a board meeting, unless it’s a major change or we need the board’s approval for, say, a change in the strategic asset allocation, which we do once a year anyway.”
The board itself has its own two-day planning session, where it sets its own agenda and receives information from the investment management group to include in the discussion.
This is in addition to meetings every six weeks or so – it used to be a monthly board meeting, but with directors Australia-wide, Bugden says the decision was to make the meeting a full day, but less frequent.
With a changing landscape, reform is a primary agenda item. The fund was early in its application for MySuper in January. The intention, after all, is to grow the fund and, as Bugden notes, Catholic Super is competing for a growing workforce among numerous super funds.
“We just want to be in there doing what we can for members.”