Linda Scott, chair of $53 billion fund CareSuper, said the Your Future Your Super performance test is driving uniformity in super funds’ investment behaviours and compositions but questioned if the trend is truly “in the national interest”.
CareSuper completed its merger with Spirit Super this month to create a new fund that retained the former’s name and the latter’s logo. It is one of the so-called “mergers of equals”, as opposed to the approach where a small fund is subsumed by a much larger player.
Scott, who until recently was also a Labor councillor in the City of Sydney, said CareSuper has always sought to differentiate itself strategically by “being big enough to invest and be sustainable, but small enough to care”.
“I say this as a statement of observation – it [YFYS] has meant that across the industry, there has been more reversion to the mean as a behaviour, and I think it’s a legitimate question about whether that’s in the national interest,” she told the ASFA conference on Wednesday.
“We think about having fund size diversity [and] investment philosophy diversity across funds, these are in the national interest.
“So how do we build incentives into the Australian superannuation system that allows enough diversity whilst also ensuring that Australians can rely on their fund to deliver them a great quality retirement?”
The modern trustee director
Scott said CareSuper and Spirit Super sought to create a memorandum of understanding that would retain both funds’ employer and employee nominating bodies on the board. The new CareSuper has a 13-person board.
The comments come amid regulatory and media scrutiny of trustee board composition following revelations of inappropriate links between a number of industry super funds and the now-defunct trade union the CFMEU.
Scott, who is a member-representative director, said the nominating bodies give the fund an “incredibly effective and targeted mechanism” to communicate and retain members.
“And it gives us diversity around the table of thought and background, which we see as invaluable,” she said.
Scott defended the equal representation model as driving outcome for members.
“I just think there has been a lot of debate that seems to be very focused in Australia, actually,” she said. “When you look outside at other retirement systems, there is nowhere near the level of debate about the structure and style of boards.”
“We have a really strong commitment at CareSuper… that we set a culture so that when people walk into our boardroom, it’s not able to be identified which side of the board people sit on, because people are there, of course, as trustee directors with their responsibilities in that way.”
Importantly, Scott said a good board should have different interests and abilities from management.
“I’ve not been an executive in in superannuation, it’s not my job to tell management how to do their job,” she said.
“I don’t have any wish other than management doing their jobs well and feeling like they have a trusted enough board that they can tell us if they have things that are getting in the way of that.
“And we bring you know the probing, the questioning, the context, the peer review, the balance of financial and fiduciary obligations for all our members.”
Note: this article was updated with Linda Scott’s correct position as a member-representative.
