Kate Farrar was appointed chief executive of the $11 billion LGIAsuper in April. Farrar has 25 years of experience in senior leadership positions, including a recent term as senior implementation leader at McKinsey & Co. She also served as the managing director of QEnergy and held senior positions at both Barclays and Suncorp. Farrar recently shared some of her views and experiences with Investment Magazine.
Q: You were appointed chief executive of LGIAsuper seven weeks ago. What are your first impressions?
A: I feel privileged to have been invited to work here. The fund has a 50-year history of service to Queensland local government employees, backed by strong investment returns. My arrival has coincided with the fund’s transformation to class-leading digital systems, which will help us optimise service to members for years into the future.
Our investment philosophy ensures we don’t take more risks than necessary with members’ capital, while also growing their asset base. If we look at performance over five and 10 years, the outcomes have been excellent – particularly our ability to protect capital in down markets.
You may have also seen that based on recent APRA [Australian Prudential Regulation Authority] data, LGIAsuper is one of Australia’s top 10 performing funds over the last decade. While some funds focus on 12-month returns, we’re aiming at being a consistently good performer over long timeframes. I think that’s one of our real strengths. We can consistently beat our benchmarks while protecting capital in down markets.
Q: You’re one of Australia’s best-performing funds, but LGIAsuper isn’t a household name. Is that a concern?
A: We’ve only been a public offer fund since July last year. So, we’ve been super’s best kept secret if you like, focusing on our local government membership base. As a public offer fund, we’re now competing in an open marketplace. That doesn’t mean our values have changed. In fact, our traditional approach of doing the best for our members and helping them strive for a great retirement is just as valid as ever. Obviously, there’s much greater scrutiny of fees, performance and governance in the current environment and I welcome that increased transparency.
Q: There is pressure on smaller funds that lack economies of scale, particularly the sub-$1 billion funds, to merge. Where do you think LGIAsuper fits in the landscape in terms of mergers?
A: I’ve no doubt there will be consolidation in the sector, but it’s not on our horizon. I’m more concentrated on making sure we do a great job for our members and being as member focused as we possibly can.
To achieve that, first I’m going to be ensuring our investment philosophy is embedded in our culture, that it thrives even through difficult markets.
Second, we’ll use innovation to drive future success. We’ll make sure our new investment in an industry-leading administration platform builds on our ability to support and engage with our members.
Third, we must continue to be a member-focused fund. Of course, we will continue to support our employer partners, but our primary responsibility will always be our members.
Q: You have a strong leadership background across a number of disciplines. What specifically attracted you to this role?
A: I love markets. I started out as a bond trader and I’ve been an electricity trader along the way. So, I’m excited to be leading an organisation that has as its primary product a market-related product.
I was also attracted to the local government heritage. When I worked with Ergon Energy Retail, which was the regional Queensland electricity provider, we had a close association with local government. For me, the opportunity to participate in the lives of the people who serve our community was fantastic.
I guess the third thing that really excites me is change and innovation. The super industry is just beginning the real, competitive process of change that we’ve certainly seen in utilities over the last 20 years. I’m looking forward to being part of it.
Q: There has been widespread media coverage of the recent Productivity Commission report, with a particular focus on high fees, underperforming funds and insurance arrangements. What’s your initial reaction to the report?
A: It’s critical for people to have access to funds with good performance, strong governance and competitive costs. LGIAsuper already ticks those boxes and I won’t be changing that strategy.
I think it’s absolutely the right focus for the government, the industry and regulators to be laser-concentrated on member balances, and fees and performance are the key determinants of member balances at retirement.
We’ll be following the progress of the Royal Commission [into Misconduct in the Banking, Superannuation and Financial Services Industry] and look forward to any recommendations that support the integrity of the system and improve member outcomes.
Q: As the pool of superannuation savings continues to grow, do you think a stronger regulatory and compliance approach is needed?
A: People need to have trust in our financial institutions, and we need to earn that trust by being accountable to our members. Culture begins at the top, and that’s where good governance and leadership with integrity play such a strong role in ensuring the super industry delivers great retirement outcomes.
Obviously, a strong regulatory framework will always be needed, but legislation alone doesn’t always deliver good outcomes. Certainly, my observations at LGIAsuper are that of a member-centric organisation coupled with a strong compliance culture.
Q: As the fund becomes more visible in the public offer environment, what can we expect to see with you at the helm?
A: I want us to be a refreshing blend of traditional community and professional innovation, and that’s what you’re likely to see – a commitment to personal service, backed by leading technology.