Chris Cuffe is known for many successes, not the least of which was his contribution to the establishment of Colonial First State. His subsequent philanthropic pursuits include his $55-million Thirdlink investment fund of funds, which donates all management fees to charity, approximately $60,000 a month.
In addition, he’s an advocate of Primary Ethics, which delivers a philosophical ethics curriculum across New South Wales public primary schools.
Chairing a superannuation board doesn’t fall under the philanthropy umbrella, but Cuffe says the not-for-profit elements of industry super mean his decisions are less conflicted.
He is, of course, now best known as chair of one Australia’s largest superannuation funds, UniSuper, and while his name is synonymous with investment, it’s his leadership that truly marks him as a charismatic force. He believes UniSuper is a leader in Australia, so it’s no surprise that he, too, casts himself as someone who can lead others during challenging times.
“I enjoy leadership. An effective chairman has got to be a leader and I enjoy dealing with difficult decisions, trying to get them through. I enjoy the process of having full and fair discussion on topics, trying to tease out the views of various constituents.”
Appointed to the board in April 2007 as a director, Cuffe has been chair for two years, though he says it’s a role he never coveted.
“I was asked would I take it on. I’ve subsequently found that, yes, I enjoy it more because I’m more involved with the senior management than I otherwise would be, which makes sense. Obviously, you have a Cuffe has much praise.
Investing directly
“Investment’s the key. Investment staff, led by a very capable chief investment officer. I regard John as the best investment manager in Australia at the CIO level. And I worked with him previously as well, so I’ve got plenty of good reasons to say that.”
An independence of thinking – not just blindly accepting conventional wisdom – is also a point of difference to Cuffe, who says one of the biggest attractions to being a director is being on the periphery of the investment process.
UniSuper now has approximately a third of its funds under management in house, an approach Cuffe says isn’t the norm, though he detects a shift in thinking.
“Managing $36 billion is a whole lot different to managing $36 million or $3.6 million, but these guys are, I think, the top of the tree in the industry funds. And UniSuper has led, I think it’s correct to say, the movement toward direct investing.”
It’s a position Cuffe says the board plays a large role in through the investment sub-committee.
Because of the committee’s experience in managing assets directly, Cuffe says it was an easy step to endorse the management’s wish to also manage them directly.
“A lot of industry funds probably haven’t had the experience of managing assets directly, so they don’t know what they don’t know almost,” he says.
“And managing assets directly is very different to managing the manager. There are all different types of risks, there’s different infrastructure, there’s different staff that are required. And you would need the investment committee and the board absolutely on side to do that.”
While Cuffe says his investment background is a positive, he emphasises that the board’s role is one of oversight.
“I’m sure it’s a positive that I come from the investment industry and have a reasonably good understanding of that. To be absolutely clear, the investment decisions and process is driven by management, overseen by the board and a committee from the board.”
Not open to offer yet
UniSuper manages around $36 billion of assets for 400,000 members, and is only open to the tertiary and higher education sectors.
“It’s not public offer and has no intention at this stage to be public offer,” he says.
“Ultimately, it’s a decision for the board, but to date we’ve had very strong feedback from our constituents that they like it being, if you like, a closed club. They feel the organisation will always be more responsive if it understands its members intimately. They’re all from a similar background, as in university and higher education staff, then there’s that commonality.”
Cuffe says there has to be good reason for a fund to be public offer, in particular to boost funds under management.
“Our funds under management are growing strongly, so that’s not a reason. And also, when you enter the public-offer sphere, you clearly have to devote more dollars and attention to marketing and sales.”
Inhouse investment isn’t the only way in which the fund has shown initiative. In 2008, driven by the board, UniSuper created a financial planning arm that Cuffe says is easy and inexpensive to access. The board needed only one meeting to approve the financial planning business.
“It was, for UniSuper, a no-brainer. And showed the independence of UniSuper, because that was nearly five years ago and it was probably ahead of its day. Other industry funds may have been using financial planning services generally via a panel of outside financial planning firms, but we decided that we were big enough, and needed the independence, to have our own.”
It’s completely independent, with salaried staff. “My hope is any UniSuper member who was thinking about leaving the fund, for either another fund or a self-managed fund, consults the financial planning group first just to make sure they haven’t been mis-sold.”
Cuffe believes SMSFs are very good vehicles for some – he runs one himself – however, for many others, they’re not.
“Where the problem sits at the moment is that too many people are sort of pushing self-managed super funds as though it’s one-size- fits-all.
“If you look in a large industry fund like ours, our cost ratio across the board is about 70 basis points. That’s a pretty cheap entry point into superannuation with some of the best minds in Australia working for you and without all the hassles of doing it.”
Cuffe says he doesn’t have exit rates, but despite UniSuper having its “fair share” of exits, it would be below industry norm.
“When people are going from, if you like, an uncontested environment, being the accumulation phase where they’re in UniSuper, to a more contested phase where the funds can move where they like, we’re going to lose members there.
“But, again, if the members are leaving for the right reason, good luck to them.”
The effects of change
In terms of overarching themes, Cuffe says every fund is trying to cope with a plethora of legislative change.
“That area occupies, it seems like almost too much time. I wish, I’m sure like most executives and boards, that the change would slow or at least be delayed to sort of packages,” he says.
“I’m a huge advocate of the [council of] superannuation custodians. I think the announcements by Bill Shorten in that area are very good.”
The fund is also generally supportive of changes designed to improve the governance of members’ benefits.
“We were concerned that the initial proposed changes increased the likelihood of frivolous and vexatious action being taken against directors, which might lead to increased fund costs and less willingness by suitably qualified people to be superannuation trustee directors,” he says.
“However, following lobbying by the industry, led by UniSuper, a more reasonable outcome was obtained because actions against directors will generally need the approval of the courts to proceed.”
Nevertheless, according to Cuffe, trustees should be mindful of the strong governance regimes and meet the higher standard of care expected of them.
“This may mean heightened risk for directors of smaller funds, but I am confident that UniSuper is well resourced in this area.”
More broadly, meanwhile, Cuffe says Australian super funds “are probably breathing a sigh of relief now” with the improvement in financial markets over the last 12 months.
“Super’s not as complex as some people make out. Basically, people on the end want to know they’re getting a return and you’re safe, as in there’s not going to be fraud.”
