It may come as no surprise that Rest Super CEO Vicki Doyle ranks adaptability and organisational agility among the most important characteristics for superannuation fund executives and structures in the current environment.

While the past year has served up many challenges to test the resolve of fund leaders across the board, Doyle has perhaps needed to draw on her canniness more than most.

It started with the early release scheme where Rest members were proportionately more impacted than any other scheme. This was followed by a new performance benchmark that has required the fund to play catchup or risk being cut off from new members and also landmark Supreme Court and ASIC actions brought against Rest requiring quick impactful decision making.

The skirmishes Doyle has confronted in the past year or so are set against the backdrop of ongoing organisational change and renewal Rest has been in the midst of since Doyle, the former distribution and product-focused executive most recently with AMP, took the top job at the now $56 billion fund three-years ago, almost to the day.

“I was given the mandate to really prepare the organisation for the future and really build out the organisational capability and that’s the mandate that I’ve been following since I started,” she said.

“I think my initial view was this was going to be a two-year journey [of transformation] and then we perhaps stabilise in a year or two, but in that time everything completely went upside down and now the goalposts for what we need to deliver for members have shifted, so I think it’s now more of a five year journey,” Doyle said in an interview with Investment Magazine in June, referencing regulatory change, the impact of COVID and the acceleration of technology adaption and use as some of the main factors keeping her and her team on their toes.

“Superannuation has never been in as much of a structurally changing and dynamic period that I can remember since I’ve been involved in investment, wealth, and super… So fortunately or unfortunately this is the world we face and so having an organisation with that adaptability, agile capability is essential to deliver for your members,” Doyle said.

Well documented by now is the $3.26 billion Rest paid to around 330,000 members when the Australian government announced its emergency early release scheme last March.

“We went from giving 100 financial hardship applications per week to 65,000 in that first week and more than 90 per cent we did in the five days so, you know, it was a really significant stress test,” Doyle added, who recalls coordinating the transition to working from home for staff at the same time.

Performance pivot

Addressing the fund’s performance relative to the listed strategic asset allocation benchmark over an eight-year time horizon following the government’s Your Future, Your Super proposals last October could be one of the biggest challenges the fund continues to face – a challenge Doyle is prepared to be adaptable to meet.

Rest is ranked among the funds likely to fall under the 50 basis point threshold relative to the listed SAA benchmark set by the government’s proposed performance measures based on the most comparable publicly available APRA six-year performance data.

Aside from the structural changes Doyle has already set in motion, which included reconfiguring the investment team under a CIO and ‘whole of portfolio’ structure for the first time – former Morningstar and AMP Capital’s Andrew Lill became Rest’s inaugural CIO last June – she has more recently moved to adapt the investment approach to give it a better chance of producing favourable outcomes relative to the government’s benchmark test.

“Rest has had quite a strong value [style] bias and while that is what has performed recently and remains a strength for us we have also looked to lift our growth and in particular our equities allocations to make sure we deliver for the shorter and medium term as well as for the longer term,” Doyle said, alluding to increased allocations to equities which has been facilitated by new, enhanced index and growth-style manager appointments since late last year.

Overall Rest has dynamically added up to 10 per cent of its core strategy towards listed markets since April 2020, Doyle confirmed. The fund has continued to add securities to its equities portfolio since November last year, finding a short term uplift in returns on the back of the so-called reflation trade.

Doyle highlighted Rest’s more natural longer-term 10 year-plus performance time horizon in light of the fund’s predominantly younger age cohort and lower average member balance.

“I think it’s disappointing that [the performance test] is not based on the 10-year time horizon,” she said.

Aside from the increased allocations to listed equities, enhanced index and growth managers Doyle said the fund had recently completed a fresh round of fee negotiations with managers in an effort to sniff out further basis point efficiencies.

Doyle acknowledged its underperformance relative to the government’s shorter-timeframe-listed benchmark may turn out to be a competitive advantage in the long run in light of her view that all funds will inevitably encounter challenges relating to the government and regulator’s performance expectations.

“I think it will change the way people invest quite significantly. I think for some funds well ahead today, it doesn’t mean they’ll be well ahead next year or the year after. And as each rolling period moves on, other funds may be more exposed, and we could be quite less exposed because we’re laser focused on it, perhaps other funds will be less so,” Doyle commented.

Taketh and giveth

While the performance test might bring extra challenges, Rest appears to be a significant beneficiary of the government’s proposed stapling plan in light of its status as the first fund for many Australians who enter the workforce for the first time through the retail sector.

Doyle is pragmatic about what advantages stapling gives Rest should the proposals become law in coming months.

“Yes, there are some benefits for us, but our modelling doesn’t show it to be quite as transformational as I think others may feel that it is,” she said, highlighting that less than half (45 per cent) of Rest members are in retail industry jobs with the majority having moved on to other industries.

“My view is because we’re going to have to meet all the same tests as everybody else and if we don’t meet those performance tests for instance and if we don’t keep our fees low and continue to deliver scale and digital service to our members, then that ultimately won’t benefit us,” she said.

Rest’s purpose as it pertains to organisational and investment philosophy is tied to its members’ “personal best”, Doyle articulates, highlighting the traditional makeup of younger members with smaller balances and a high proportion of women, many of whom are working in part time and casual employment.

Within the five-year timeframe she has given herself to execute the operational change she was brought on for, Doyle said she’ll continue to build out Rest’s internal capabilities with an aim to manage 20 per cent of its assets inhouse (currently 11 per cent) with growth in internalisation still to come from real assets (listed and unlisted) and equities.

Rest has continued to make numerous key investment and operational appointments with Lill building out his team with new asset class heads including recent appointments such as Cbus’s former head of equities strategy Kiran Singh and BT Investment Management’s former head global equities Sonia Bluzmanis.

When Doyle started Rest had around 175 staff, now the fund employs around 350.

“I envisage that number [of staff] to keep heading north over the next couple of years because the requirements and what we need to deliver for members in this environment is substantial and we need to make sure we’ve got the capability,” she said, pointing to further build out of the fund’s internal ESG capability,” she said.

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