When Kevin O’Sullivan says he doesn’t like using the word “unique”, it’s probably because that’s the way people within the superannuation industry have described UniSuper’s investment model for the past eight years while he has been CEO.
“I don’t think anything is truly unique,” O’Sullivan says during an interview this week, before conceding UniSuper’s approach to investing is a “differentiator” for the fund.
Two-thirds of the UniSuper’s assets are now managed in house, a proportion that has been gradually increasing over the years and is more than most funds have taken on.
Meanwhile around $27 billion of the $83 billion the fund manages is in its defined benefit scheme; UniSuper has the only DB fund in the country that remains open to new members.
UniSuper has also differentiated itself as a consistent performer – its MySuper product is regularly top ranked in comparison to its peers; over six-years its fund was in the top five best performing funds relative to its SAA listed benchmark with 1.65 per cent excess returns, according to APRA’s latest heatmap data.
But those within the investing community – both on the fund side as well as within investment managers – probably point to the discretion of UniSuper’s investment team under CIO John Pearce to shift capital quickly to back investment decisions as the fund’s biggest differentiator.
“We can make calls for pretty big licks of money that other funds can’t do. If there is a big deal happening we can sort it out in a day,” O’Sullivan describes during an interview with Investment Magazine via video link from his home on the edge of the Dandenong Ranges in country Victoria.
“Whereas most other funds have to wait until the next investment committee and get everyone involved whereas we don’t have to do that,” he says.
It’s the fund’s agnostic view of investment specialisations along with its ability to attract top talent that differentiates UniSuper’s investment model, O’Sullivan highlights.
“You go to investment team meetings at UniSuper for the first time you wouldn’t know if you’re talking to a bond person or an equities guy, the way we set it up we don’t have silos between various sectors because we want to make decisions what are wholistically good for the funds,” O’Sullivan describes.
In an interview last year John Pearce, the once Colonial First State chief executive and head of investments, labelled UniSuper’s inhouse investment model as “complex”, and said that worked mainly because it’s team had been brought up with it.
“We have got people who have run money throughout their careers and they have come to UniSuper and they could probably make more money elsewhere but they actually love working for a profit for member fund with autonomy and flexibility,” O’Sullivan says.
Harnessing the culture at Unisuper as CEO required O’Sullivan to become a master of delegating, not a natural setting he reckons in light of his actuarial and consulting training and background.
“Most actuaries – and I’d put myself in that category – are analytical and want things to be done correctly and tend to be able to do things ourselves… As CEO I learned to be successful you really need to sit above things rather than in things,” he says.
Public offer on the table
O’Sullivan acknowledges the fund’s biggest challenges might well land on the shoulders of his successor which is currently the subject of an active search process.
“They’ll need to have strong engagement with regulators,” O’Sullivan says, noting the time he spends on matters relating to legislative change these days dwarfs any of his other activities.
It’s the so-called ‘stapling’ proposals making the most work for O’Sullivan and other fund CEOs at the moment, he says.
“Every fund in Australia is talking about stapling now, if you’re not then you’re not doing your job properly,” he says.
Because UniSuper isn’t a first fund for most members it will take a hit to its cashflows if proposals under the current Your Future, Your Super legislation currently being debated in the Senate passes.
Whether UniSuper becomes a public offer fund as opposed to a fund closed to academics and professors within the tertiary education institutions and their families is a discussion currently taking place at the board level, O’Sullivan confirms.
“We opened up to family members in Oct 2017. We have opened the door, the question is do we open the door more widely. And if you open the door how far do you want to open it? Clearly those discussions are happening,” he says.
While O’Sullivan is mostly satisfied with his time at UniSuper and his decision to pull up stumps to spend time with family and take on non-executive roles potentially in industries outside of superannuation, he laments the lack of engagement with policy makers in recent times.
“As an adult in the room if I can call myself that, I should get a call asking whether I truly think these changes are bad, and if I was to say ‘yes’ [they are bad] I’d like to think they’d like to hear what I am saying. Unfortunately that’s not happening,” he says, adding that industry hasn’t done itself any favours by preserving its self interest in the past.
How funds can continue to improve outcomes for members while delivering on legislative change will be the biggest challenge for his successor at UniSuper and for the industry more broadly, O’Sullivan says.