The outgoing CEO of Media Super has criticised the Government, accusing it of hypocrisy and ideologically driven attacks aimed at undermining industry super funds.
Graeme Russell, who will retire as chief executive from July 1 after 21 years in the industry, says the Government needs to “stop the hypocrisy” in its stance towards not-for-profit funds.
Prime Minister Scott Morrison and Treasurer Josh Frydenberg have been calling for the industry funds to help fund the rebuilding of Australia in the wake of the Covid-19 pandemic. “But at the same time they let [Tim] Wilson and [Senator Andrew] Bragg mount constant attacks aimed at destroying industry funds,” Russell says.
Russell adds that the Government can’t criticise the industry funds based on their performance and behaviour. “They just don’t like the idea of unions being involved in the management of capital,” he said. “It is part of a deliberate coordinated attempt to undermine public confidence in industry super funds.”
A powerful model
Russell joined the industry super ranks in 1989 when he became an honorary trustee director of Just Super, which then had 3300 members and $3.9 million of funds.
Russell says that industry super is “a most powerful model” and he notes that critics of its governance push to one side the fact that as many employers sit on the fund boards as unions.
“What is the problem with a governance structure that has delivered superior returns at lower fees, that hasn’t robbed their members, that has not charged members for services not rendered and has not charged dead people? What is the problem here that we’re trying to solve? There isn’t one.”
He says the alternative “financial masters of the universe’ model has delivered a series of financial disasters, from HIH to Lehman Brothers.
Not all doom and gloom
Russell took up his first CEO role at First Super in June 2008; then in March 2013 he was appointed CEO of Media Super, the $6 billion fund representing members of the print, media, entertainment and arts sectors.
The print and media sector has been significantly disrupted in recent years, with major restructuring and job losses. Then the Covid-19 shutdown hit, with arts and entertainment venues closed, making it one of the worst affect industries.
But Russell downplays the alarmism around the impact of job losses on Media Super and other sector-specific funds, and says the outlook is strong. “It’s not all doom and gloom,” he says. “While members have lost jobs and that’s been difficult, we’ve still got a lot of market upside.”
He notes the last 12 months has seen an increase in contributing members, an increase in contributions, and a decrease in the number of inactive members. “That’s the case for a number of other industry-specific funds.”
“We’re growing. These [industry-specific funds] are growing.”
A simple country boy
While there has been a strong push for scale through the mergers of super funds, Russell says there is also a strong future for mid-size funds like Media Super.
“Scale is important, but it isn’t everything,” he says, adding that Media Super’s size means it can invest in assets such as small and microcaps, that large funds can’t.
“I’m a simple country boy who looks at the outcomes,” he adds. He notes the fund has moved from being a poor performer six years ago to ranking third on SuperRatings’ tables for 2019, and it has been a first quartile fund over the past one, three and five years. It also has lower fees than most of the big funds.
Russell says he wouldn’t change Media Super’s structure of outsourced administration and investment, but he says it is becoming harder to run an efficient fund “because the regulatory and compliance demands and costs are getting higher”.
“Governments have to stop constantly changing the rules. They just have to stop doing it. Get it right, then leave it alone. Because it makes it very difficult for super funds to look long term and invest long term if they don’t know what the policy is going to be in the next six months.”
One option for mid-size funds is to federate with other funds, where they would combine their investments and back office but still maintain their industry focus and brand. “I think some funds will be looking at how you do that.”
Russell says the most important aspect of industry-specific funds is its high degree of engagement with its members which creates loyalty.
Media Super spends a lot of time and effort on member engagement and education, with a goal of steering them in the direction of getting financial advice. But Russell says the broader financial industry has a “long way to go” to explain the benefits of financial advice and paying for it.
He says funds like Media Super can’t simply be service providers. “You have to be part of the industry, support the industry and invest back into the industry and jobs.”
The Fund has invested $200 million into 150 film and television projects. It has an $80 million revolving Australian film and television financing fund with $40 million ready to deploy when the industry ramps up again. Media Super also has a $20 million R&D financing fund, and it is looking to invest in creative tech ventures and early-stage seed funding.
Russell says industry super funds are keen to help Australia on the road out of the pandemic, and he notes that IFM has invested billions in airports, roads, ports and renewable energy generation. “Mr Wilson thinks there is something wrong with that.”
Continue to contribute
Russell says the past four to five months have been intense, but he has weathered the early 1990s recession and the GFC and isn’t as worried as others about the disruption caused by the pandemic.
“Here I am leaving at the end of another very significant market disruption,” he says. “We’ve seen this movie before, it’s just got a different script. It’s another market cycle and we need to invest through it.”
Despite his departure from Media Super, Russell hopes to continue his long service to the industry after he leaves. “I hope to be involved in some way in industry super,” he says, though not in a full-time role. “I hope I’ll find some way to contribute.”
To listen to the recorded interview with Graeme Russell on the Market Narratives podcast click above or find the series on Apple Podcasts, Google Podcasts or Spotify.