Despite being currently engaged in a merger operation with VISSF and following recent join ups with First State Super, VicSuper and WA Super, mega-fund Aware is on the lookout for more.
“We know how to do these things, we have a playbook and that makes it so much easier” said the fund’s chair and industry veteran Neil Cochrane.
But even with these advantages Cochrane said he could see room for improvement in the regulatory landscape to make the process more efficient.
“We would certainly like to have the process a lot slicker,” he said. “And we’re really dependent on APRA to help change some of the processes that they require with a merger so particularly when it comes to small mergers, we can do it more efficiently and quickly.”
The fund now has about $155 billion worth of AUM placing it firmly as the country’s second largest fund, behind only Australian Super.
Power of scale
And when asked what were some of the key performance indicators to show that a merger was successful Cochrane cited the fact that VicSuper members saw a 20-basis-point decline in their administration fees after the recent merger as well as a 10-basis-point decline in the cost of the Aware Super pension product. The WA Super members experienced “a significantly better insurance coverage. At the same costs”.
But this was only the immediate “low hanging fruit” and he said he had no doubt there would be more benefits to follow.
“One of the other big benefits of (the) mergers has been the scale and the investment opportunities it has given us,” he said. “When I first became chair, we managed $40 billion, we’re now managing $155 billion and so the diversity of investments and opportunities that we could have, and have been able to generate have been significant.”
“We’re looking at establishing offices offshore (to help internationalise investments). We’re owning assets directly. We’re taking assets private, off the stock exchange… We’re now being sought out by the seekers of capital (and) we’re now seeing deals we would never have been able to see before. And returns that are very attractive to our members,” he added.
Role of the board
Cochrane was at pains to point out though that any merger had to be in the best interests of the members and while that appeared to be an obvious “first hurdle” it took a lot of work to overcome.
“Scale is important, obviously, but it can’t be the reason for doing the merger because that alone is not going to bond you as a group,” he said
One of the first things you need to resolve is how the board is going to be structured he added.
“What we did in the case of the Vic Super (merger) was we recognised that there were a lot of things we needed to learn from each other, therefore, an expanded board for a limited period of time was going to be the best way to go,” he said
“We expanded the board from 12 plus one to 14 plus one, brought four people from the VicSuper board on to ours and we have a written commitment… that by June next year, we will shrink the board back to 10 plus one… because we know that’s a much more efficient size,” he said.
Cochrane stressed that before and during a merger the board members needed to spend a lot of time together just to get to know each other and to get to understand the culture of both boards and to get a sense of whether they had an alignment.
“We were very conscious that you needed an alignment of values of objectives of the membership, to get a new, collegiate organization,” he said.
A million bosses
Cochrane has spent more than 30 years in the super industry and has been chair of the Aware board since 2014.
“I’m very conscious that I am the independent director, therefore as the independent chair I try to be very democratic,” he said of his personal leadership style.
“But I’m reminded that everybody has a boss. So, who’s my boss? I’ve got 1 million members as my boss and I feel extremely accountable to them.”