Size isn’t everything when it comes to delivering the best service to members, believes Naomi Edwards, chair of the $2.1 billion Tasplan fund.

“We don’t accept that the sweet spot for super funds is over $10 billion,” she says. “We think that you can run super funds well for less than that if you’ve got some unique proposition – ours is that we’re effectively servicing our Tasmanian members with a high-touch service, particularly small employer groups.”

The fund is currently in merger talks with fellow Tasmanian-based Quadrant Super and Edwards says her fund is also open to a merger with the Retirement Benefits Fund, which could in total create a much larger $7 billion Tasmanian-based fund.

“Tasplan is totally open to any possibility that would continually get our members access to better products but we know they value us being local and on-hand for them,” she says, noting that there is plenty of goodwill from all parties.

Tasplan’s local base remains non-negotiable though (last financial year the fund moved into new purpose-built offices in Hobart and Launceston). Edwards first moved to Tasmania in 2001 and remains passionate about the State, where she lives on a small 60-acre farm.

“I’d lived a very Sydney CBD financial services type of lifestyle – we’d never moved too far from Martin Place – and so being in Tasmania has been fantastic because it’s just exposed me to a much broader and interesting part of the population.

“Tasmania is facing tough times – we’ve got the highest unemployment in the country and superannuation funds actually make a significant contribution to employment just by the three funds being headquartered here.”

A survey of 280 funds by the Australian Prudential Regulation Authority in 2012 found larger industry funds posted higher risk-adjusted gross returns than smaller funds, outperforming them by a net 75 basis points a year.

Tasplan passed the $1 billion milestone in 2007 – almost all of the fund’s growth overseen by previous chairperson Doug Fry who retired in October 2011 after 16 years in the top job. The search for his successor involved a wide hunt for an independent to steer the fund’s board which is comprised of equal representatives nominated by Unions Tasmania and the Tasmanian Chamber of Commerce and Industry.

“I think the board was pleased to get somebody local who had had experience chairing a super fund, but was a little but fresh and had some new ideas,” says Edwards, who was previously chairperson of Australian Ethical Investments from 2005 to 2011.

While many industry funds are fighting a passionate rearguard defence of the equal representation model, which is under threat after the government issued a discussion paper, Edwards has a different stance.

“The model we’ve had so far has worked well for members – there’s no denying that,” she says. “Nonetheless there would be absolutely no harm for industry funds to be on the front foot in moving towards some kind of best practice model – for me, best practice means opening your board to the widest possibility of skill sets. So therefore opening it up to people who might be independent of sponsor groups can only be a good thing because you’ve got a broader pool of people to choose from.”

But while the broader Stronger Super regime recommended by the Cooper report has had some positive outcomes, such as improved governance and more robust boards – it has also added substantially to costs.

“It concerns me that it’s been a tremendous amount of energy and cost for something that, on the face of it, doesn’t actually look terribly different from a member’s perspective, to what they had before.”

Tasplan’s MySuper product remains largely the same as its previous default investment option – a costly licensing approval process that many other industry funds have also gone through. That option, which caters to more than 90 per cent of members, dipped in 2012-13 returning 13.06 per cent compared to the median fund’s 14.7 per cent according to SuperRatings, but an annualized 4.65 per cent over the five-year period, compared to 3.9 per cent for the median fund.

“The focus on peer benchmarking has reduced because super funds realise how much members lost trust with us [through the global financial crisis]. Many saw a whole bunch of negative returns and it didn’t matter where you were on the peer benchmarking table – members were losing faith – so we have to go back to basics and construct portfolios very carefully.”

The fund has just set up its first dedicated investment committee (previously, the entire board worked with asset consultant Mercer before making investment decisions). A major focus is how best to protect returns against strong market downturns – part of the solution has been to increase diversification by employing multi-asset funds, where the manager is given a more flexible mandate to make allocation decisions in the hope that it can outperform an inflation-linked benchmark.

Tasplan’s main objective is to outperform inflation by at least 3 per cent over rolling five-year periods – a target it lowered in 2012 from 4 per cent plus CPI “reflecting both post-GFC environment, but also that our investment style tends to be quite conservative and protective of downside”.

Edwards has also sat on the other side of the investment fence: as well as her background with Australian Ethical Investments, she remains a non-executive director of Hunter Hall, which predominately manages retail money rather than super fund investments.

The latter experience is valuable. “It’s useful for all trustees to understand the power balances and the various money flows between the asset consultant, funds management and super trustee industry – to be able to see who’s driving the Porsches, what bargaining power we have, and to constantly maintain a little bit of tension in your relationship with your managers and your asset consultants to make sure your always getting the absolute best returns.”

Chant West statistics on Tasplan

1 year                                                    13.1

3 years                                                    7.4

5 years                                                    4.6

10 years                                                  7.0

Members June 2013 (‘000)                   103

Assets June 2013 ($m)                      1,955

Proportion of assets in super default (%)           81

Net contribution flows 2012/13 ($m)   108

Leave a comment