Wednesday, 11 November 2015

We’ve previously shared our views on the super industry’s focus on short term investment returns and the limitations in the way the investment performance of super funds  is rated and compared.

The risks a super fund manages on behalf of its members are long term in nature, therefore I am hesitant to celebrate too enthusiastically when our short term investment performance sees us positioned at the top of the annual league tables and similarly I don’t sweat it too much when we aren’t.

With our focus on managing the long term risks members face firstly as they accumulate and then drawdown their retirement savings, what is an important part in any evaluation of investment outcomes is the strategies used to achieve them.

Here I would like to share with you some validation we recently received from the highly regarded international researcher Keith Ambachtsheer.1 I believe this demonstrates more definitively that in managing the long term outcomes we’re thinking about the right risks in the right way on your behalf.

In the most recent Ambachtsheer Letter, QSuper is named as a thought leader for the range of initiatives we have embedded into our strategy over the last few years. These are outlined below2:

  1. The introduction of our default investment option, Lifetime, moves us away from the traditional ‘one size fits all’ approach to one which recognises differences in individual member needs based on age and account balance. Simply put, we recognise that where our members have different levels of assets and are at different stages of life, the likelihood is they will be best served by different investment strategies. 
  2. We are starting to provide members with pension targets or ‘retirement estimates’ in their annual benefits statements and regular progress reports on where they stand in the accumulation phase of their journey towards a pre-set post-work pension target. Support is offered through a range of tools and advice to guide members towards achieving their targets.
  3. Development work is underway to upgrade the product choices in the post-retirement phase of the lifecycle journey by including a longevity protection purchase option.
  4. Based on our best professional assessment of asset pricing conditions and other relevant socio-economic considerations over time, we can adjust the settings of our Lifetime option to maximise the probability of meeting the investment objectives we target.
  5. In terms of asset management we focus on long-horizon wealth-creation in both public and private markets and have signalled this intent by dropping out of participation in short-horizon performance ‘league tables’.

In summary, our view of the role of a superannuation fund is to identify and deal with the big risks that you face regardless of which point in life you are at. What’s more, if we take an evidence-based approach to thoughtfully consider how we manage these risks, we can have greater confidence in ultimately delivering our members a stable, real income in retirement for life. What I hope this post shows is that we’re some way along this path.

1. Keith Ambachtsheer is President and Founder of KPA Advisory Services Ltd and is widely recognised for his thinking on pension governance, finance, investment, and related issues. KPA Advisory Services provides strategic advice on governance, finance, and investment matters mainly to pension organisations, but also to governments, industry associations, pension plan sponsors, foundations, endowments, and other institutional investors around the world. The firm was founded in 1985.

Mr Ambachtsheer co-founded CEM Benchmarking Inc. in 1991. Today, CEM is recognised as the premier global benchmarking organisation in the pensions and investments field. In 2005, he became the founding Director, and Adjunct Professor of Finance, of the International Centre for Pension Management (ICPM) based at the Rotman School of Management, University of Toronto. He was named Director Emeritus in 2014. He became the founding Editor of the Rotman International Journal of Pension Management in 2008. In 2011 he was appointed Academic Director of the Rotman-ICPM Board Effectiveness Program for Pension and Other Long-Horizon investment Institutions.

2. The Ambachtsheer Letter, October 2015 is reproduced in full with kind permission from KPA Advisory Services Limited.

The views of the author and those who provide the responses to comments posted on this blog are not necessarily the views of the QSuper Board. We’ve put this information together as general information only and you should get professional advice before relying on this information.

Past performance is not a reliable indicator of future performance. Each of our investment options has a different objective, risk profile, and asset allocation.

We are delighted that you have chosen to visit our blog and welcome your comments. Please see our Community guidelines for our social media house rules.