Equip Super boss Scott Cameron sees corporate funds as the obvious pool for new merger targets as the $32 billion fund gears up to increase its funds under management to $50 billion by 2025.
The merger with Catholic Super two years ago was the big catalyst for the then Togethr Trustees which is the umbrella company to the emerging fund giant. The Equip name is now the focus going forward.
The merger was formally approved on June 30 under the Successor Fund Trustee transfer but the investment pools were combined earlier.
Aiming higher
While declaring his fund as open for new business Cameron said “we have sufficient scale today to run the business well for members but see $50 billion as a good target ”.
“The risk for the very big funds is they lose their connection to members,” he added.
“We really see our point of difference being our strong brands and connectivity with our 150,000 members,” Cameron said.
Australia’s super industry is split with the top dozen having $60 billion plus under management behind Australian Super’s approximately $240 billion and another half dozen or so in the $20 to $35 billion range.
Cameron has no fears of being left as an also ran in the latter category arguing the fund has sufficient size to get scale benefits without being too big.
After completing the BOC ($750 million under management) and Toyota ($897 million) mergers earlier in 2021 Cameron said his aim was to grow to $50 billion in funds and roughly double the membership to 300,000 in the next five years.
Mopping up
The deals underlined the Equip strategy to follow the APRA push to mop up smaller funds with an eye on corporate funds.
Cameron said the bigger you are the more a competitive focus is important and the fund has to ensure it is fit for purpose. The cost of multiple brands “is not a big diversion,” he noted.
Two years after the initial deal, Catholic Super is now merged fully with Equip with former Host Plus and Vic Super executive Andrew Howard as the new chief investment officer.
The two funds were initially kept separate under the unique Togethr Trustees model but the money is now housed in the one pool.
Howard replaced Anna Shelley, the former Catholic Super CIO who is now chief investment officer at AMP.
The Catholic brand remains but technically is only open to member entities like a Catholic school or hospital and new members off the street go to Equip.
Equip dates back to April 1931 when it was the super fund for the State Electricity Commission of Victoria and the La Trobe Valley based fund expanded through utilities funds including the Gas Fuel company and Water Industry super before branching out to the Rio Tinto Staff super fund and more recently Toyota and BOC.
Welcome diversification
Catholic Super members included nurses and other health care workers, teachers and what Cameron describes as a “welcome diversification of members”.
Cameron joined in August 2019 just after the Catholic Super merger after a long stint with Computer Share. He was chosen according to chair Danny Casey because of his “talent for team creation and innovation”.
Performance has been strong with a 2021 return for its balanced fund of 16 per cent. The Equip Balanced Growth option, returned 16.6 per cent for the 2021 financial year maintaining its position as a top 10 best performing fund in the balanced category.
The Equip fund’s balanced asset allocation includes 27 per cent in overseas equities, 24 per cent Australian stocks, 14 per cent fixed income, seven per cent property, seven per cent infrastructure and five per cent cash.
Inflation
Cameron acknowledges it will be difficult to match last year’s return with inflation the biggest concern.
“Equity prices will be under pressure but they still have value,” he noted.
The funds are managed externally with the fund retaining control of governance issues. It has an investment staff of around 12 people in its 200-strong workforce.
“The Trustee exercises its voting rights on segregated Australian Equities portfolios,” Cameron said.
“The Trustee will consider the recommendations of the Australian Council of Superannuation Investors (ACSI) and its fund managers, and, if appropriate, the views of other ESG service providers and various stakeholders, in formulating how we exercise our voting rights,” he said.
More discretion is given to managers of overseas equities.
But Cameron maintained the Trustee reviews the arrangement on an annual basis by reviewing the appropriateness of the voting policies and guidelines on corporate governance of the managers evaluating the implementation by each manager.
