Spirit Super is looking to double its assets to become a $50 billion fund, according to chair Naomi Edwards.
In an interview with Investment magazine, Edwards said the fund, which is celebrating the first anniversary of its formation as a result of the merger between the former MTAA Super fund and Tasplan in April 2021, now has some $26 billion in assets with 324,000 members.
But she said that it needed to get to a “sweet spot” in size of around $50 billion which she believed could also allow it to take advantage of its operational platforms.
“We believe there is a sweet spot where you can really optimise both investment returns and administration costs which is about 500,000 members and around $50 billion in assets,” she said.
“It’s a good starting point in terms of economies of scale.”
Consolidation to continue
Edwards predicted that consolidation in the Australian super-fund sector would continue with the emergence of some 10 megafunds with assets of more than $100 billion.
“There will also be quite a few $50 billion funds,” she said.
She maintained Spirit Super had already seen the benefits of its merger which had allowed it to combine its two systems and reduce costs to members from day one.
Hobart-based Edwards was chair of Tasplan from 2011 until it merged to become Spirit Super in April 2021.
Still talking but nothing imminent
She said Spirit Super was “having coffees with people at the moment” about mergers but there were no announcements imminent.
“We are very keenly looking to optimise the platform we have. We think it’s a great platform,” she said.
She believed that there was still a place in the Australian superannuation market for smaller niche funds, but she said for Spirit it was important to have a minimum size so that it could optimise its customer experience.
While the MTAA fund was based in Canberra and Tasplan in Hobart, Spirit Super’s new chief executive, Jason Murray, is based in Brisbane.
The former chief of member experience at QSuper, Murray took over as chief executive in February this year.
Edwards said his appointment was in line with Spirit Super’s view that it was “geographically agnostic” when it came to its staff.
“When Jason Murray became available and he wanted to stay in Brisbane where he has a young family, we said: “That’s fine, we can make this work”.
“Whenever we are in the same city, we get together for dinner, and we have a phone conversation every week. It’s one of those arrangements which would never have been possible or imagined prior to Covid,” she said.
“But it’s a very hot employment market at the moment… it’s a whole new world. We couldn’t be further apart physically, but we feel incredibly close.”
Edwards said Spirit was planning to promote itself as a fund which had a strong commitment to regional Australia with offices in cities like Launceston and Newcastle.
“With regional cities there is still a sizeable chunk of the population who really want to have a physical presence, who want to go into a local office and talk to someone,” she said.
“We have been very successful in having people on the ground in cities like Newcastle.”
Edwards said Spirit had allocated 15 per cent of its funds for impact investing. It had a target for this impact investing portfolio to create 100,000 new skilled jobs in Australia, of which 50 per cent will be in regional Australia.
“We’ve got a strong focus on investments which grow the regions in Australia,” she said. The plan was to invest $1.5 billion for investments in small businesses in regional Australia by 2030.
In January the fund announced plans to take a 51 per cent stake in the Port of Geelong, the second largest port in Victoria, in a $1.2 billion dollar deal alongside Sydney-based funds manager Palisade Investment Partners.
She said Spirit’s chief investment officer, Ross Barry, who lives in a regional area three hours north of Sydney, had a strong commitment to invest in regional Australia.
She said the fund also had an investment in the $250 million Victorian Business Growth Fund.
This had seen an investment in Flavorite, a family owned company which is the largest hydroponic grower of tomatoes in Victoria, based in the regional town of Warragul.
Spirit Super has also benefitted from the sale of its part interest in Canberra-based open-sourced data company Instaclustr which has just been bought by US-listed company NetApp for a reported $500 million. The company was founded in 2013 within the Australian National University with capital from ANUConnect Ventures, a partnership between ANU and the former MTAA Super.
ANU Connect makes investments in early stage ventures in the Canberra region.
Customer service focus
Edwards said Spirit prided itself on having high levels of customer service, keeping all its customer service operations in house to control quality.
“Our contact centre has just won another award for having the most consistent service to members,” she said.
She said Spirit was finding that there was a high level of engagement by a new wave of younger super fund members who were happy to engage with the fund through telephone apps.
“Very young Australians are starting to engage with capital markets,” she said. “We are finding people under 25 are using our apps and checking their balances and becoming quite aware of their super.”
“But we are finding that it is people in the 25-to-45-year-old age range who are not engaged with their super.”
Bedding changes down
A trained actuary who worked with Trowbridge Consulting and then Deloitte, Edwards is senior vice president of the Actuaries Institute of Australia. She said the superannuation sector was hoping that there would be no major changes to the industry after the next election.
“There have been so many changes,” she said.
“Let’s just bed these down and let the industry get on with its life, including adjusting to all the regulatory changes which have happened over the past few years.”
She said there were still reforms needed to improve superannuation including its expansion into the “gig” economy workforce and improving superannuation coverage for women.
But she said Australians were now “sick and tired” of all the changes to the laws and regulations around superannuation which she said were confusing and also reduced confidence in the system.
“It seems the superannuation issue will be very quiet in the election this time around which is a good thing,” she said.