Compensation proves key to super success

Sep 1, 2022

Citywide: ByJassmyn Goh, 01 September 2022

Jassmyn Goh

Two of Australia’s largest super funds believe the route to their goals goes through paying their investment teams in a way that rewards their skills in delivering for members.

The chairs of Australia’s two largest superannuation funds have cited proper compensation and reward as the driving forces of the success of superannuation funds.

Speaking at an event held by the Australia-Israel Chamber of Commerce, Australian Retirement Trust (ART) chair Don Luke said the secret going forward was not about what asset classes funds were focusing on but about having teams of people who were aligned with members’ best interests.

‘You need to make sure that people are remunerated, rewarded and focused on delivering what’s best for them so you need teams internally to drive that and to do that,’ Luke said.

‘But you also need to partner with great investment managers from all around the world to get those best ideas.’

Similarly, AustralianSuper chair Dr Don Russell said the $250bn fund’s scale allowed it to bring its investment team inhouse and it could invest in projects that a $20bn fund would not be able to do.

‘We’ve got to be able to staff their investment teams with the best people. We’ve got to be able to pay them in a manner that rewards their skills in a way that channels their skills to delivering for the members in aggregate,’ Russell said.

‘We need to make sure that we don’t compensate them too narrowly around notions of carry or performance of their particular asset class. Our compensation has always been geared very much to the overall performance of the Balanced fund.

‘So we’re keen to build teams within AustralianSuper so that we don’t have the equity team competing with the fixed income, which are competing with the infrastructure too, and to date we’ve been able to do it.’

Luke noted that while ART had more than 100 people in its investment function it also believed in ‘deeply partnering’ with people of global best practice in various investment markets.

‘If we’re working in areas like infrastructure in the US, we think it’s not a bad idea to build deep relationships with people that we really admire in that space,’ Luke said.

‘However, there comes a time when there is an overarching compelling reason not to, and to do it yourself – the pathway forward will be different for all of us and that is wonderful.’

Luke said each fund was exploring different avenues and approach to be ‘exceptional’ in investment procedures, approaches and returns for its members.

‘We are not here to be mediocre. We are here to do something exceptional,’ Luke said.

‘I think, as a sector, we have done that today. We would criticise ourselves for not doing well enough and we’re very determined to do it better in the years ahead.’

Russell said super funds also needed to be constantly held to account and needed to ‘look over our shoulder all the time’ as there were other funds choosing different paths. He pointed to Hostplus’ chief investment officer’s Sam Sicilia’s outsourcing-only model being one such path.

‘It’s the same with ART and Don Luke. If we don’t get the best out of our investment teams he will overtake us in some other form. The knowledge of that is really important and really powerful, because we’re going to end up with 10-15 large funds and there’s some people promoting the fact that we’re going to lose some of the other 50,’ Russell said.

‘But I would say we’re going to end up with 10 funds of global scale that are bought and sold every month by the league tables and will have a level of competition that is highly unusual for Australia.’

Super exec pay under scrutiny
Last year, some of the super funds’ executive salaries and bonuses came under scrutiny by a parliamentary committee.

The committee found that AustralianSuper’s executive team were paid $6.09m including bonuses totalling $2.54m between four executives during the 2019/20 financial year.

It found the highest-paid executive was its CIO Mark Delaney with a base salary of $733,437 and a performance payment of $947,400. This plus his superannuation gave him a total remuneration of $1.7m.

Aware Super revealed its CIO Damien Graham was paid a bonus of $470,000 and its chief executive Deanne Stewart was paid a $254,000 bonus. Stewart said the fund paid competitively but not top of the market.

Maritime Super, which will merge with Hostplus by early 2023, CEO Peter Robertson defended his base salary of more than $550,000 during a hearing and said it was ‘modest’.

TWUSuper’s chair David Galbally was found to have been remunerated $290,700 a year for working one day a week and a total of $410,000 a year. Its CIO Edward Smith was paid $360,000 but nobody was paid a bonus.