HESTA’s 800,000 members are predominately women and members can experience a working history that sees them in both part and full time jobs.

This means investment and advisory strategies are tailored to meet the goal of providing retirement outcomes for members who may have low account balances. While low account balances are the norm, the fund is growing faster and more sophisticated than many others.

“The health services sector is the fastest growing area of the economy,” chair Angela Emslie explains.

Investment

As a fast growing fund that recently hit $30 billion in funds under management, there are a range of investment issues around managing that growth and getting economies of scale.

“In the past we would have been able to go into smaller investments, but these days small investments of $100m may not make a lot of difference to a fund, but may take up time in terms of due diligence,” says Emslie.

“We want to make sure we don’t become complacent because we’re large, we think about how to be flexible and open to new ways of doing things and voiding traps where there might be diseconomies of scale and bureaucracies.”

The fund’s ambition partially stems from the fact that many members have low account balances.

“One of the things we do from an investment perspective is set the return target high,” she says. “We have a CPI+4% target, which is quite an ambitious target, because we know that our members have low account balances. They experience part-time work, and breaks in their work patterns. We know we have to get a reasonable return over time to make a difference to their retirement income. We set that higher than other funds for that reason.”

Advice and engagement

The second leg to HESTA’s operating model is their education and advice function, which is designed to engage the 800,000 members in a cost effective manner.

“We have various strategies to encourage women to take control themselves of their super and be interested in their super, rather than leaving it to their partner, and also encouraging them to make additional contributions where they can,” she says. “A lot of it is about educating women on the importance of super, given their low account balances.”

HESTA believes that part of building their engagement with members includes activities such as their annual awards program – the HESTA Aged Care Awards, the HESTA Community Sector Awards and the HESTA Australian Nursing Awards, which all recognise the contributions workers make in their sectors and in the community.

This has led to HESTA having a high recall as a brand amongst health and community services workers.

“That role of supporting the industry and showing innovation has been a successful strategy in terms of both engaging with our members and showing them that we’re not just another financial services organisation,” says Emslie. “It’s evolving and we’re only at the stage now where all the awards programs are bedded down. We do measure member and employer engagement and that has continued to be very high.”

Lobbying

A third leg to HESTA’s strategy is its lobbying of the government around policies that impact on the potential retirement savings of its members, such as the superannuation sector’s campaign for the government to retain the low income superannuation contribution (LISC) scheme.

One of Emslie’s concerns for the industry as a whole is the push towards mandatory independent directors for all funds. Emslie, who is president of the Australian Institute of Superannuation Trustees (AIST), is opposed to the move, even though she is the independent chair of HESTA. However, Emslie believes that for HESTA, having directors that are drawn from industry brings “passion” to the fund and attracts those who would not normally find the time for a trustee role.

“One of the directors is a CEO of a large, not-for-profit hospital group,” she says. “He’s not the person who would have the time, inclination or interest in being a director at a different fund, and he’s not someone that another fund would say, ‘come and be a director’.”

Emslie, not surprisingly, is a big fan of the representative trustee model. “It has led to a range of outcomes for members that need to be celebrated,” she says.

“The challenge is that once you get into the definition of what ‘independent’ means in the sense that you see in the corporate world. By the ASX definition of independence, our board members are independent. They also have that extra overlay of trustee duties which are higher than the corporate duties. HESTA also has the requirement for a 2/3 majority, so no one group of board members can dominate.”

During Emslie’s time on the board of HESTA – she was first appointed a board member in 1994, and named chair in 2013 – the board’s structures and organisation has shifted. Emslie pointed to a decision to create an investment advisory panel for the board, consisting of three independent members and an investment expert that meet with three board members, the fund’s asset consultant, Frontier Advisors, and senior management.

“We meet three or four times a year to kick around strategic issues in an unstructured environment, and it has added a lot of value,” she says. “There’s a range of issues around our asset allocation that we’ve been looking at and tweaking – whether we would do more dynamic asset allocation, and that’s work in progress at the moment. We have a process in which we will measure the outcomes of that advisory panel.”

At the time of writing the board was in the process of searching for a successor to Anne-Marie Corboy, who hands over to Debbie Blakey this week.

Emslie talked on this topic at the time of writing: “We’re really looking for a strong leader that takes us to the next level, but at the same time can take the same values that have developed under Anne-Marie – that strong commitment to members, and the strong culture around that,” she says. “That not only flows from the asset management, but from values driven from the governance model.”

Rachel Alembakis has more than a decade of experience writing about institutional investments, asset owners, custody and administration for a variety of publications.