The members of Christian Super’s My Ethical Super fund are sticking with it despite being informed about its history of underperformance over seven years, says Ross Piper, the fund’s chief executive officer.
“By and large the membership has remained solid. There was no mass movement (out of the fund),” said Piper, who has been at the helm of the fund for four and a half years. “This reflects the members’ engagement and that they care about investing their super in line with their values, beliefs and faith.”
In fact, Piper said the fund’s new member growth rate remains firm. “The fund has maintained its positive net member growth rate, which like the fund’s member retention rate, continues to be consistently higher than industry norms.”
Christian Super is one of 13 MySuper funds to fail the Australian Prudential Regulation Authority’s (APRA) performance test last year. APRA told Christian Super in December to merge to become a bigger fund with scale to deliver better value to members.
The not-for-profit superannuation fund announced it is intending to transition its members into retail superannuation manager, Australian Ethical’s super fund. Both funds are carrying out due diligence and a decision will be made at the end of this month. Both funds share a long-standing, dark green investing focus. The merger will see the two pioneers of ethical investing manage $9 billion with 100,000 members across a range of superannuation, managed funds and ETF products.
“We want to make sure that the core things that our members deeply value will continue,” Piper said.
Half of Christian Super’s 30,000 strong membership pro-actively sought out the fund, rather be automatically signed up through their employer. “Direct choice and active choice are about 50:50 in the fund.”
Christian Super has 2400 employers that include the Baptist Union of Australia, Christian Schools Australia and Churches of Christ in Australia. Around 60 per cent of members are women and come from a broad range of backgrounds.
Ross said the reform and consolidation of the superannuation sector is a good initiative by APRA, but he believes that offering a superannuation fund with a deep alignment to members’ values of not investing in companies whose activities ‘damage human flourishing or destroy the planet’ is important too.
“Fees and returns are important but so is engagement,” said Piper. He says other superannuation funds typically find engagement with members one of their biggest challenges.
Christian Super has been investing ethically for over 20 of its 34 years. It has four levels of screening that includes negative screening by avoiding investing in companies that violate human rights or produce addictive or harmful goods and services. It does not invest in companies that exploit people or use predatory practices such as casinos. It uses positive screening and actively buys into ethical companies that are doing the right thing environmentally and socially.
The fourth screen is impact investing which it began 16 years ago and currently makes up around 7.2 per cent of Christian Super’s $2.1 billion assets. “It’s why our members place such a high level of trust in us,” Piper said.
Christian Super’s impact investing team spun off from the fund in 2016 to form Brightlight, a specialist investing group that manages impact investments for a range of community trusts, foundations, government and superannuation funds as well as Christian Super.
The fund has 21 impact investments highlighted in its 2021 impact investing report that includes micro loans to unbanked people in Africa and Asia; an alternative credit company in India; online education courses in Thailand and Vietnam and small-scale renewable energy in Africa. In Australia, Christian Super has invested in building specialist disability housing, affordable housing and a number of social benefit bonds that are ultimately used for projects such as mental health community support and reducing the risk of young homelessness.
While there are some media reports that the fund’s impact investments have dragged down its performance, Piper says it isn’t the case. In fact, the unlisted assets that make up the impact investments are maturing and have performed strongly over the past year. “In the 12-month period ending 30 September 2021, the impact portfolio delivered double digit returns, well above the relevant composite benchmark.” Says Piper.
He says strengthening systems and approaches to measuring and qualifying impact is ongoing. “At present, there is no single measure of the non-financial returns of the portfolio, however, individual managers’ report on impact such as kilowatt hours of renewable electricity generated, number of loans provided to female business owners in emerging markets, or residence placements in specialist disability accommodation.”
He says the impact portfolio also provides additional diversification as it performs differently to other asset classes. Some of the highly profitable impact investments include responsAbility, a Swiss based investment manager that holds sustainable agriculture, renewable energy and microfinance investments. Another is CloudFactory, a cloud-based platform that allows companies to outsource tasks to cloud workers in developing countries such as Nepal and Kenya.
Christian Super’s lower holding of growth assets, compared to its peers, is what has hurt its performance, Piper says. Members switched to conservative investment options during the GFC which led to the fund’s decision to invest more conservatively.
Adjustments have now been made to wind back the defensive dynamic asset allocation position to an asset allocation mix more suited to a benchmark relative environment. “These changes were made a few years ago and are contributing to strong performance relative to various industry benchmarks,” Piper says.
He points out that Christian Super’s MySuper product is ranked third for one year returns and sixth for three year returns versus peers, according to SuperRatings fund crediting rate survey to 31 March 2022 – SR50 balanced (60-76 per cent) index.
“Our ethical high growth option is ranked first for one year returns and fourth for three year returns vs peers, according to SuperRatings’ survey to 31 March 2022 – SR25 high growth (91-100 per cent) index,” he said.
The fund employs JANA as the asset consultant of Christian Super for several years. Christian Super also announced a new chief investment officer in January, replacing Mark Rider with former Victorian Funds Management Corporation’s David Stuart.