Former Victorian premier and federal member of parliament, John Brumby likes women. Since his appointment as independent chair of the MTAA Super Trustee Board in April 2011, he has overseen the appointment of the fund’s first female chief executive and independent directors.
Former AvSuper chief executive Leeanne Turner replaced the fund’s longstanding leader, Michael Delaney, in November 2011 to become MTAA Super’s second-ever chief executive. Shortly after, Vicki Allen and Susanne Dahn joined the trustee board.
After the fall
It signalled a fresh start for the $6.7-billion fund, which overhauled its board, executive team, corporate governance and investment strategy after MTAA Super came out of the global financial crisis in worse shape than many of its peers.
The fall was compounded by the fact that the fund, with its high exposure to unlisted illiquid alternative assets, had outperformed for a decade and won many industry awards.
“We were in the wrong place at the wrong time,” Brumby says.
“For many years MTAA Super was an industry-fund darling. The portfolio was heavily overweight infrastructure and property, and asset values were heavily marked down. We were no exception.”
When they finally did, the fund’s returns plummeted. In the 2009 financial year, the fund’s value fell 23.3 per cent, placing it dead-last out of 194 funds.
It recorded $1.67 billion in negative investment income for the year. The fund also faced an investigation by the Australian Prudential Regulation Authority, which embroiled its asset consultant Access Capital Advisers. It has taken three years to restore MTAA Super’s reputation. It continues to make changes. Last financial year the fund further reduced its strategic asset allocation to unlisted assets. The growth option’s allocation halved from 50 per cent to 25 per cent, while the balanced option’s allocation fell from 35 per cent to 30 per cent.
“We’ve made all the necessary changes, which included a new strategic asset allocation and board reform. We have strengthened the investment and risk management teams, and managing risk is embedded in the organisation. We produce monthly risk-limit reports,” Brumby says.
Better in threes
Brumby, who was appointed deputy chair of Industry Super Australia (ISA, formerly Industry Super Network) in August, is passionate about trustee governance, transparency and accountability and backs the Cooper Review’s 2010 recommendation for three employee representatives, three employer representatives and three independent trustees on trustee boards.
So, MTAA Super is one of two funds within ISA that emulates the 3-3-3 model, which federal minister for finance, Mathias Cormann, vowed to enshrine in legislation when he was the shadow minister. HOSTPLUS is the only other ISA fund that has embraced the same structure.
“There’s no question that everyone who was on the board when I first joined was totally committed to the fund, but independent directors are important because they bring a broader range of skills, experience and diversity on boards.”
More than 100 people were considered to fill the board vacancies in 2011, from which a short list of 12 was generated.
Dahn’s extensive financial services experience, including 12 years as a non-executive director on two superannuation boards, brought invaluable insight, says Brumby, while Allen’s background in property and professional trustee services added complementary skills and knowledge.
As a bonus, their inclusion solved an obvious gender imbalance. “Susanne and Vicki were selected based on merit but as an additional benefit, we were able to address the issue that the board has never included women,” he says.
“The superannuation industry, both retail and industry funds, still has work to do to fix up the gender imbalance on boards, which are predominately male.”
While other 60-year olds are enjoying a round of golf or relaxing on a cruise ship, Brumby is showing no signs of slowing down. He has seven directorships, including director of Huawei Technologies, andThe Fred Hollows Foundation. He is often quoted in the mainstream press. Most recently Brumby called for a review into the coal seam gas laws and added his voice to those calling for changes to the way the senate is elected, describing the process as a “lottery”.
His opinions have clout. Brumby had a long and distinguished career in public life, serving in federal and state parliaments for more than a decade as treasurer and then premier of Victoria. As treasurer, he delivered seven consecutive budget surpluses.
But of all his private sector and non-profit boards, he has a soft spot for MTAA Super: it was his first appointment after retiring from politics in December 2010. “After leaving politics, I decided to wait at least six months before taking on new roles to enable me to think carefully about what I wanted to do,” he says. “MTAA was the first position I accepted and it has been a priority for me.
The single biggest issue
The fund’s diversified options continue to underperform their benchmarks, however Brumby says it was well prepared for the transition to the new Stronger Super reforms. From December 1, MTAA Super’s new MySuper product, My AutoSuper, will be available. Last year, it also launched RetireSafe, a post-retirement income solution developed in conjunction with MetLife, open to Australians over age 60 with a super account balance of $50,000 or more, and provides an income for life. So far take-up has been “low to moderate”, but Brumby adds that the fund is realistic about how long it could take for it to gain traction.
Only 2 per cent of MTAA Super’s members are over the age of 66 and only 4 per cent between ages 60 and 65, however, adequacy and longevity risk are important focuses. “Australians are living longer and the big debate is whether 9.25 or even 12 per cent are enough. The answer is no and the real figure is actually closer to 15 to 18 per cent,” Brumby says. “There is no escaping this debate and it’s not a political issue. It’s the single biggest issue affecting households.
“It may take three years out in the market before our members start to think about and understand products like RetireSafe. As the industry moves from accumulation to decumulation, there will be increasing focus on post-retirement by policy makers and members. There is definitely a need for retirement solutions as part of a fund’s overall portfolio of options.”
Brumby says the fund is now ready to start thinking about other things such as potential mergers.
“We’ve been busy with MySuper, but after January 2014, you’ll see more focus on mergers because the reality is that scale will be an issue for some funds. We are pretty comfortable with our direction and scale, and have no plans for change at this stage. But we are always open to funds approaching us to take about these issues.”