Now’s the time the “rubber really hits the road” said Spirit Super’s CEO Leeanne Turner.
She has recently gone through the process of merging Tasplan and MTAA Super amid Covid and some of the most radical legislative rethinking in the industry’s history and admitted that the yet-to come bedding down process of that merger may be the hardest part.
But amid all this, she also admitted the fund was open to even more of the same.
The new fund has about $25 billion in assets under management, still below out-going APRA deputy chair Helen Rowell’s $30-billion line in the sand for a fund to remain “competitive” in today’s environment.
When asked about her opinion on Rowell’s figure, Turner said she didn’t disagree and the fund was open to more mergers but with important caveats.
“The number is interesting for this fact: it is that [number] at a point in time and it is going to continue to change particularly as we see mergers of the big funds,” she said.
“So Helen’s view of $30 billion now, it might not even be 30 in five years’ time. It might be a larger number than that. But [for us] it’s not about being competitive. In my book it’s about delivering outcomes to members. And that has to be the focus of attention all the way along.”
“We’re not looking to become a mega fund [but] we are definitely open for business for more mergers, for more inorganic growth.”
She stressed that while they were open for more merger discussions they were still bedding down the current one.
“And when I say bedding, it’s not just the the nuts and bolts and the system things and investments, that’s kind of all happened. We’re literally bringing together two organizations. And that takes up quite a bit of time, but particularly from the people side of things,” she said.
“We didn’t have to merge, there was no imperative to merge, other than seeing what was happening in the industry that scale was coming up with better outcomes for members. So it was about trying to find the right partner,” she said.
“We’ve approached this merger as, as a partnership, it’s not a takeover in anybody’s language.”
In terms of the immediate benefits the merger has brought about, Turner cites from the outset their administration fee dropped for all members in the fund.
But she adds: “bearing in mind, of course, there are absolutely costs associated with merging. And that’s just a fact that you’ve got to contend with. So you’re not necessarily going to see a lot of cost savings, particularly in the first 12 months”.
Another key issue facing newly merged entities will be the APRA performance test – outlined in the Government’s Your Future, Your Super legislation – the full details of which have yet to be revealed.
A spokesperson for APRA said this aspect was being led by Government and while the legislation has not passed parliament the organisation had not nor would not put out anything publicly because nothing had been finalised or confirmed.
When asked about how Spirit Super plans to assess its historical performance as a newly formed entity Turner said her expectation (admittedly amid the uncertainty going forward) was it would be the longer-term performance of the successor fund, MTAA which would be considered. From April 1, when the merged entity officially came into existence, it would be Spirit Super’s which would be measured.
“MTAA super is the successor fund, if you like,” she said. “So the Tasplan assets have come to MTAA.”
Asked about what were some of the major challenges ahead in a potentially radically new regulatory environment she warned the key issue would be around stapling and growing membership.
She said she was was very confident she had a good investment team in place and [Spirit] would be a competitive player in the investment space, but she said “we’ve woken a lot of the of the disengaged [members] along the way, particularly with the early release programs”.
“With where the legislation’s going, with people knowing they’re going to be stapled to something, I think they are far more engaged and circumspect about who they want to be with. And I think, that it is really is going to come down to how member-centric we can be. So that’s going to be a key driver for us.”
Culture can make it or break it
Turner maintained something that is absolutely crucial to any organization is having a good culture because that can literally make or break it and in a merger situation there has to be compatibility between the merger partners.
“I think more recently, we’ve seen a lot of attention paid to that,” she said. “Over the years, we’ve seen behaviours change a lot. And some sort of behaviours that were once acceptable are no longer,” she said.
“One of the things that made this [merger] work was the fact that we had a value set that was very, very similar. So that was a great starting point and a great base for us to build upon.”
She describes crux of the the culture of both of the funds as an “absolute steadfast belief in putting the member first”.
She also outlined the importance of acknowledging the heritages of the different organisations which brought a diversity of membership, something she said was reflected in the name they chose for the new entity – Spirit: “agnostic to both heritages if you like but very embracing of all Australians, very much a consumer brand”.
“I think by putting a lot of effort into understanding our respective organizations and acknowledging both our heritages, I think that really does help the organization come together, and we hope through that, that we’ve been able to minimize the stress that does come with merger activity,” she said.