WHILE the battle over the hearts and minds of superannuation stakeholders is fought relentlessly by industry and retail funds, it is their low-key cousins in the corporate sector that have quietly stolen the show – at least when it comes to the performance of big funds administered in Western Australia.
According to figures released recently by the Australian Prudential Regulation Authority, the key watchdog for superannuation, the top pack of performing funds in WA subject to its regime have all been corporate funds.
In an analysis of the nation’s top 200 funds, the superannuation fund for grain handling cooperative CBH Group had the best performance over five years ending June 30 2011, returning an average of 7.1 per cent to members each year, nearly two percentage points ahead of its nearest rival, the Goldman Sachs & JBWere fund, which produced 5.2 per cent.
In WA, CBH’s three nearest rivals were corporate funds Worsley Alumina Superannuation Fund, Clough Superannuation Fund, and Bankwest Staff Superannuation Fund.
The Worsley Alumina, Clough, and Bankwest funds were also the state’s best performers over eight years.
Due to anomalies regarding CBH’s reporting date, its performance was not previously included in the APRA figures despite its existence since 1945, and its eight-year returns are not available to match that.
CBH Superannuation Fund chairman of trustees Terry Cunningham said the fund had a strong following with the employee base of the farmer-controlled cooperative, with about half the permanent employees directing contributions from their salary to it.
Mr Cunningham said the business believed the fund and its performance was of considerable benefit to employees.
At about $140 million, the fund is small enough to be nimble and keeps its costs down by being housed within the CBH business. It has only one permanent employee, fund secretary Donna Adam, and outsources everything else.
It uses an investment adviser employed by another top-performing fund, the similarly sized Clough. That person is chartered accountant David Haddingham, who does not claim all the credit for the fund’s performance given he only took the role at Clough in October 2010.
“We are such a low-cost fund, if we perform at an average level we’ll come out ahead,” Mr Cunningham said.
But the CBH fund’s performance has not been particularly ‘average’, aided by a large West Perth landholding and a timely sale of part of that block, which gave it a 27.7 per cent return for the year ending June 30 2007.
While that performance might seem skewed to one particular asset, the CBH fund dipped to negative 4.2 per cent the next year, still much better than most rivals, and then managed a 1.3 per cent positive return in 2009, a year when much of Australia’s superannuation sector was underwater by double digits.
The fund’s close links to a sympathetic employer are not just in subsidising the cost of administration; the cooperative has been integral in the development of land, which has boosted the superannuation returns of members.
A decade or so ago, the superannuation fund owned the building that housed CBH, along with significant other land in a pocket of West Perth near the City West railway station. The cooperative, which owned the neigbouring car park, struck a deal to do a development that would provide greater accommodation.
However, the resulting building ended up being worth close to 10 per cent of the value of the fund, well over the limit of 5 per cent of assets linked to its corporate sponsor.
The divestment, and its timing during booming prices in the middle of the last decade, helped fuel the fund’s performance.
Similarly, a failed leaseholding for the CBH Superannuation Fund-owned Blue Note tavern prompted the sale of that building at around the same time, providing another windfall.
The fund still owns some land in the area, notably a building accommodating Disability Services.
Among the other funds administered from Perth are several retail funds under the ASGARD banner. ASGARD, a master trust product with national reach that was created by Perth-based Sealcorp more than 20 years ago, still nominates Perth as its administrative home, despite now being part of Westpac.
Listed financial planner Plan B also controls several retail funds administered from its Perth base.
At the lower order of WA-based funds is the industry fund Concept One, created in 1986 by the Association of Independent Schools and Independent Education Union of WA.
The $180 million fund uses investment consultant WP Invest and administrator The Australian Super Group, a Perth-based subsidiary of Australian Superannuation Administration, which services several other local funds.
Concept One representative Michael Wilson, who is employed by ASG and is also WA chair of the Association of Superannuation Funds, said the fund had also focused on being a low-cost, no-frills investment for its members – a so-called ‘black & gold’ version.
However, Mr Wilson said demand from members due to competitive offerings had prompted Concept One to offer some additional services such as insurance and, starting soon, a consultant on the road who will be able to assist investors.
That new employee will not be a licensed financial planner.
“That will change the cost structure but we believe it will not change the cost structure significantly,” Mr Wilson said.
Outside of Apra regulation is GESB, the brand name of the government employees superannuation board, which has been the monopoly provider for state public servants.
GESB, the state’s biggest fund with more than $12 billion under management, has had a tumultuous few years after a planned privatisation was stopped at the 11th hour in 2008 due to the cost.
That proposal has since been abandoned and the government has moved to offer members the ability to leave the fund at the end of the month, something many financial advisers and other funds are looking forward to with some relish.
GESB, which has several accumulation funds and two defined benefit schemes, still makes the news. Former CEO Michele Dolin quit GESB to join the private sector last year, and investment manager Sharon Hicks left just recently.
Their departures followed earlier major board changes led by former under-treasurer John Langoulant, as chair, and including PwC actuary Catherine Nance, who was the state adviser who blew the whistle on the cost of the proposed privatisation.
Former Westscheme CEO Howard Rosario has taken over GESB; his fund was swallowed up by national player AusSuper.