Australian and Dutch pension funds believe many alternative asset managers’ fee structures are “grossly” excessive, says Australia’s Centre for Investor Education (CIE). Jamie Nemtsas, director, said the 2/20-style fee structure was a “common stress point” for attendees at the recent Superannuation and Pension Funds Summit on Dutch and Australian Cooperation and Alliance.
Government officials, consultants, academics and representatives from a dozen Australian superannuation schemes attended the summit. High-level figures from the respective countries - representing more than AUD1trn (€730bn) in assets - set out to increase collaboration and share expertise on a number of topics, including the construction of defined contribution (DC) systems. They also explored the possibility of co-investment projects and the establishment of an international network of ‘top-tier’ funds.
Nemtsas said the 2% management fee was “widely viewed” as being grossly excessive. The Dutch contingent recommended pension funds demand more transparency on fund managers’ internal costs and suggested management fees be structured to cover this pro-rata. Nemtsas added: “The argument for achieving cost economies of scale from potential co-operation or collaboration was discussed extensively, with many ideas shared on how to achieve this.”
Australian pensions funds attending the summit came, in part, to advise the Dutch on DC systems as the country overhauls its Pensions Agreement.
Brad Holzberger, chief investment officer at the AUD30.7bn QSuper fund, said: “Australia is a leader in the management of DC funds. We have little exposure to defined benefit plans anymore, but we have a central commitment to DC, and our fiduciary system is becoming very experienced at them. I would expect to see Australia lead the adaptation of lifecycle investing, for example, along with the use of longevity-type products.”
Gabriel Szondy, independent director of CARE Super and the Military Superannuation Board, said: “Interestingly, the feedback from the Dutch has been that they are as vitally interested in what we are doing as we are in them because our DC system appears the way the future systems will evolve in developing Europe. They want to learn as much as possible. They are also keen to learn how we engage and communicate with our members.”
And Jason Cotter, manager of portfolio services at the AUD32.6bn AustralianSuper fund, said: “We have existed in a choice of fund and defined contribution environment for many years and can help the Dutch funds prepare if some of the changes being discussed here occur.”
All attendees were very positive about the summit. Holzberger said: “The main interest is forming networks for future co-operation with Dutch funds. We at QSuper have not yet co-invested with any international funds, but we are open to it, and I see it as an inevitable part of our future operations. Australian funds have long tended to take the initiative in searching across the globe for investments, partners and ideas because we are a small but open economy.”
He added that a typical Australian fund has at least half of its assets outside the country. “We can also look to the US, Europe, the UK and Asia with a bit more objectivity,” he said. “Being small, we can align with anyone without feeling out of place.”
Cotter said AustralianSuper was hopeful the summit would lead to further discussions and, most importantly, action. “It presents an excellent opportunity to think about where our industry is headed in conjunction with like-minded peers,” he said.
“We already have strong informal relationships with many of the funds at the summit. What the summit offers is an opportunity to transform informal discussions into a more structured programme that will evolve. An advantage of co-operation is that you can share the ideas and experiences of the group to create outcomes that you would not achieve if you acted alone. Responsible investment or ESG is probably is an example of this.”