Industry Funds Transition Leadership

The recent appointment of Cbus CEO David Atkin to the Association of Superannuation Funds of Australia board to replace Australian Super CEO Ian Silk represents a transition by the industry super funds sector to a new generation of leaders.  In addition to taking on the ASFA appointment, Atkin has also recently become the first Australian to be elected to the international board of the United Nations Principles for Responsible Investment.

Atkin, whose fund has 580,000 members in the construction and building sectors, wants to ensure that the interests of his members are reflected in the overall policy positions of ASFA, but also sees the importance of a collaborative approach.

“The industry is made up of different sectors. I will be looking to work with the other sectors to see the areas where we can agree and can consolidate unified positions we can take to government. I am keen to see what common issues we can take up to government , knowing that there a particular issues that are important to sectors and that sometimes it is not possible to reach consensus across the different sectors, and that is ok.”

It is likely that Atkin will use his role on the board of ASFA to support calls for innovative policy responses to increase member superannuation contributions.

“We would believe that 9% needs to be increased. It might happen in the way that compulsory superannuation was introduced in the first place, which was that it was a negotiation between the industrial parties and the government. Maybe there is a case for bringing the parties together again to see if some sort of trade-off can occur, where wages are traded off for increased superannuation contributions. That might be a way that you could get agreement - hard to do - but it was hard to do originally.”

With its core construction and building sector membership Cbus has a long history of developing its own property assets through its own property arm Cbus Property.

Atkin says that the nature of the fund provides significant advantages in terms of understanding the property market and property people, allowing it to quickly identify good investment opportunities. The fund has turned its expertise to developing green buildings, believing that they are likely to outperform over the longer term.

“We accept the proposition that climate change is occurring and will impact upon behaviour within the property sector and that increasingly, - and we are seeing this - tenants will be asking for what the energy ratings of the buildings they occupy are, and they will begin to seek out properties that are more green rated. We know that governments around the country will only take up new tenancies in buildings that have a strong green rating. From a risk perspective we don’t want to be holding on to assets that may become redundant in time and may lose their value, but we also see an upside if we can take a lead in building and developing and owning green star rated buildings.”

Atkin says the fund also has an interest in expanding its investments in emerging markets.

“We are very positive about investing in emerging markets. We think there is more upside, more opportunity there because those developing economies have not been as impacted by the economic downturn. It is true that we need to build our familiarity about those markets. Our asset consultants and internal investment teams are spending more time visiting, meeting investors from Asian markets. We are still seeking to understand the different types of markets, and different types of issues, and we need to understand the different risks of investing in those markets, but we are very positively disposed to investing in those markets.”

Cbus currently has around 70 separate investment mandates something that Atkin sees is about right.

“We are not looking to substantially increase that number, if we were to make any changes, or add any managers, we would need to move on some of the managers that we have. The number we have right now is about right, beyond that you have too much complexity, too many relationship, and you start to get a whole lot of inefficiencies.”

Cbus utilise a process of bringing on investment managers with smaller mandates at first in order to enable the fund to efficiently transition managers.

Atkins says “generally for us to think about a manager we need to think that they have the got the ability to accept up to a $50 million mandate. We may begin a little less than that. We might have some seed investing, we also do that to have some backup managers so that if we decide to make some changes to our manager selection we already have a mandate we can build up.”

Cbus was one of the early super funds to endorse the Principles for Responsible Investment, having previously had an active role in corporate governance issues.

Atkin sees that it is important for the PRI to ensure that signatories take their responsibilities seriously and not just sign on as marketing exercise. “The self assessment process, and the auditing, to ensure that people are doing what they say, is going to be an important development.”

While the integration of environmental, social and governance factors has been slow, Atkin sees that this is necessary in order to bring investment managers along.

“For us it is about working through the food chain. What we now need to do, and we are doing is to work through our asset consultants, investment managers, through to our brokers, to take it afford that we want them to do this analysis when making their decisions.”

“People need to buy into this. They need to think accept that this is a legitimate and relevant area of activity. It is true that many have not, but increasingly that is changing. The challenge is to integrate it into you investment processes. It is not about having specialist teams, and having your mainstream investment people not buy into it, you have to integrate it into your mainstream processes.”