Four prominent super fund executives at the AIST Australian Superannuation Investment conference on the Gold Coast discussed best practice and what is allowable on investment committees. One common insight was investment committees making decisions without talking to asset consultants. Each executive gave a candid explanation of their fund’s policies, the key points of which are summarised below.
Jon Glass, chief investment officer of MediaSuper
Glass recommended that committees should have a common framework for thinking through each proposition put to them. He said this would prevent the situation of a fund manager “selling” them a product, rather than the trustees “buying” the product.
“So often a proposition is put before trustees,” he said. “We get answers and information we do not understand. We cannot fit them together in a way that makes sense and so we are sold products rather than buying them.”
He added that relative non-experts could have an advantage over investment experts in decision-making on boards, as more often than not intuition was proven to guide people to correct answers.
He also emphasised the importance of making risk-based calculations in every decision.
“We are weather forecasters, not gamblers. We say there is a 60-per-cent chance of rain tomorrow. That is the way we should talk at our investment committees. We should talk about likely outcomes, we should think in the realm of probability.”
Danielle Press, chief executive of EquipSuper
Press revealed that she and her chief investment officer had removed themselves from the investment committee as it was too hard not to let herself impose on decisions. She said the committee had also improved governance by having a framework for approaching every investment decision.
She urged investment committees to have a greater emphasis on recognising risk and seeing whether funds were being compensated for it, rather than focusing on returns, and that equally they should measure the decisions they do not take as well as the ones they do.
Robyn Petrou, chief executive of EnergySuper
At the end of 2012, EnergySuper changed its investment committee structure by having all trustees take part. “Succession planning was a key consideration,” Petrou said. “Plus, investments is one of the biggest fiduciary obigations, so trustees considered it important to be involved.”
Michael Rice, chief executive of RiceWarner
Rice urged independent directors to be chosen for their investment skills alone, suggesting former fund managers or practiced SMSF investors. He said this would provide balance against asset consultants, who he described as not fully being on the side of the investment committee. He added that the role of trustees was strategic – to suggest mandates, but not to implement them. Similarly, trustees were not needed to attend fund-manager beauty parades, as by this stage their strategic input in helping decide the asset allocation had been made.