HESTA’s move to invest in start-up super administrator Grow Inc was always going to attract some controversy, coming as it does off the back of its own sometimes tortuous transition to Grow’s platform, and the news of its acquisition of a minority stake – which it picked up by exercising a purchase option negotiated while it was planning out its transition – resulted in questions from some quarters as to the value the fund saw in the so-far still loss-making business.

But there are more reasons to invest in something than the value on immediate offer. Members usually benefit from being able to access their money in a timely fashion and from their fund having a functioning administrator, and HESTA is now arguably in a better position if Grow is eventually bought out than it would have been without the stake.

“HESTA moved to GROW last year given the critical importance of modern,  secure and future-ready technology to member services over the long-term,” a HESTA spokesperson said in response to a request for comment on the purchase. 

“Last week we exercised an option to purchase a minority stake in GROW to support and enhance the administration services provided to our members, including the development of more personalised experiences.”  

Judged purely as an investment, Grow Inc. is a small start-up administrator that shows promise but which is competing with entrenched providers for business that is difficult to win and unrewarding to service. Administration transitions are not fun and come with significant reputational risk; HESTA learned that the very hard way, after its months-long limited service period – which it thought had been well-telegraphed – was met with uproar from members, regulators and the media. It’s arguable that APRA’s move to impose licence conditions on the fund in the aftermath has also acted as a disincentive for other funds to undertake their own transitions and that prospective clients might now be thinner on the ground.

But you don’t hear about things when they go well (nobody’s interested in headlines that read “Small explosion, few hurt”) and NGS Super pulled off its own transition to Grow with fewer road bumps – and fewer headlines. There are also signs of a shift in mindset from the industry about what good administration looks like and how much they’ll have to pay to get it, though that shift in mindset will also need to take place at the regulators for there to be wider change.

Separate from any value concerns, HESTA’s move to acquire the stake shows how important administration has become to super funds in the past few years and is a sign that the war for members is increasingly going to be won through methods other than investment performance.

While it’s unlikely that HESTA will go down the path of a full acquisition – the history of wholly super fund-owned administration platforms is a bloody one – it’s clear that it views its own future as intrinsically tied to that of Grow, and for good reason. After all, what good is having your money in a traditional superannuation fund if you can’t get it out?