Mercer Super wants to grow its assets under management through more acquisitions and will leverage the strength of the global business behind it to seal deals, according to CIO Graeme Miller. 
 
“Mercer Super is now $85 billion and more than a million members, but we’re still just outside the top 10 super funds in Australia, and we don’t want to be just outside the top 10 super funds in Australia,” Miller told the Investment Magazine Fiduciary Investors Symposium in Healesville, Victoria. 
 
“Our aspiration is to be in the top five. And one of the ways we’ll do that is through acquisition. Should an appropriate opportunity come along, we’ve got the balance sheet and the track record to follow through on that, which differentiates us from most players.”  
 
Mercer Super picked up BT’s Personal and Corporate superannuation funds in 2023, boosting its assets under management to $63 billion and giving it a platform to compete more strongly with the dominant industry super funds (if it does pick up more funds, it might be doing so under a different name; its parent company, Marsh McClennan is set to rebrand itself and its businesses as “Marsh”).  
 
Miller also contrasted Mercer’s footprint with that of the largest profit-to-member funds, which are still building up their international teams to source and manage assets across Europe, the UK and the US.  
 
“No one comes close… We’re three times larger than the biggest Australian super fund. We’ve got 3000 investment professionals all around the world and we’ve had them there for decades. We’re not building a team in New York, person-by-person, or in London, person-by-person.  
 
“I’ve been amazed at the extraordinary capacity that brings in terms of the research that’s done, the coverage of the global asset class universe, the global manager universe. And it’s translated into very strong investment performance for our members on a very consistent basis.”  
 
Still, there can be downsides to scale if it isn’t managed correctly.  
 
“The first one is the fact that big organisations become bureaucratic, they become lazy, they become entitled, their lose their hunger, they lose their dynamism – they lose the thing that may well have made them successful in the first place. . And the world is littered with example of those,” Miller said. 
 
“The other obvious disadvantage of scale – and maybe the two are related – is the complexity that can creep into organisations as well. One of the key reasons why industry funds have been as successful as they have been over the last few decades is that they’ve, by and large, maintained very clean, very neat, very uncomplex business models.”  
 
The performance test isn’t “unreasonably constraining” Mercer Super’s investment strategy, Miller said, and the fund has built up significant headroom against the performance test and is in no danger of failing it in the foreseeable future – even if the outcomes of the investment performance it delivers are in the “horrendously extreme left tails of the probability distribution they’re drawn from”. 
 
But he still took issue with the methodology of the test, and said that the faith-based and ESG funds that failed it had only measured success in a way that “differed fundamentally from what the performance test set out to do”.  
 
“There are no laws of physics in investing,” Miller said.  
 
“If we built a bridge from here to there, there are laws of physics that say that if we build it in a certain way it won’t fall down… The reality about investing is that you can do all the right things and get the wrong outcomes, and you can do all the wrong things and get the right outcomes. 
 
“We know that as investors, and the fact that over a relatively short period of time a particular investment process has delivered a particular outcome doesn’t provide any evidence whatsoever that the process was a poor process. If I build a bridge and the bridge falls over, I can reliably conclude that I didn’t obey the laws of physics and that I’m a bad engineer. If I build an investment portfolio that fails to deliver an outcome that I didn’t even know I was supposed to be trying to achieve, that’s not necessarily an indication.”