IT PAYS TO KEEP IT SIMPLE

Some super funds do achieve strong outperformance over time. For example, Catholic Super has scored the highest performance for Australian shares over one year (16.9%), three years (10.6%pa) and five years (13.7%pa).

The reason it has done so well, according to Garrie Lette, the fund’s chief investment officer, is that asset selection is outsourced to high-conviction boutique managers who have relatively modest amounts under management, rather than big-brand managers.

“We understand that they go through difficult investment periods but we don’t panic. We are in for the long term,” he says. “They have rewarded our loyalty and patience. Every manager has had a difficult time but they have come good.”

Lette has worked as an asset consultant with Mercer and has been advising Catholic Super since 1993. He joined as CIO in 2010.

Catholic Super has $8.5 billion under management across all investments. It has seven Australian share managers in the balanced option: four large cap, two small cap and one “better beta”. The balanced pension option has three Australian equity managers.

“We don’t over-engineer things but stick to the ‘keep it simple’ philosophy,” says Lette.

Getting the blend of managers right is key. It is important to have managers that will perform well in different markets. “When one is doing poorly, another may be doing well,” he says.

AustralianSuper has one of the biggest amounts in the Australian shares investment option, at over $2 billion. It spreads the assets across 15 Australian equity managers. It was ranked 10th over five years by SuperRatings. Hostplus, which has 18 Australian share managers, was ranked ninth.

One of the reasons there are so many investment managers is that boutique managers have a cap on funds under management. They won’t keep taking large amounts of funds.

Typically super funds have large-cap specialist share managers and smallcap specialists. Some have a value style of investing, others a growth style or an absolute return style.

Some super funds are increasingly expecting their equity managers to invest along sustainable lines, as it is important to members.

“All of our active managers have built-in sustainability in their processes,” says Lette. “But we don’t insist on excluding any investments such as fossil fuels but expect our managers to be aware of the risks.”