Fewopening acts could have demonstrated just how quickly and easily confidence in the financial world can be shattered as did Mike Musuraca, a trustee of the New York City Employees Retirement System (NYCERS).
He outlined to CMSF the devastation caused to his fund and its members by the terrorist attacks of September 11. Not only had returns been knocked, but many members now faced the possibility of retrenchment, as a recession battered New York city struggled to find the money to rebuild itself.
Musuraca said his fund planned to use its investment clout to influence how New York city was rebuilt and to ensure that the way it was done was in the interests of the city’s working people.
NYCERS was also one of five New York city pension funds which together lost $109 million as a result of the Enron crash — a debacle which, according to Musuraca, highlighted the need for trustees to become much more vigilant and active share owners.
The poor returns theme was continued at CMSF with research by Sovereign Investment Research director Ray King revealing that over the next five years, lower returns remained the superannuation industry’s most significant issue. No other issue came close.
Tony Osborne and Sharon Bullen of Shannon’s Way offered some creative communication ideas that could be used to ensure that members didn’t lose confidence in super or blame their super funds for their low returns.
Borrowing from events like air turbulence and bush fires, they put together various 30 second TV adverts promoting super as a long-term investment. These were backed by an 1800 hotline number to phone for more information.
Following several high profile local corporate and super collapses, the safety of Australian super funds came under the conference’s microscope.
ASFA chair David Holston noted that losses due to fraud in Australian super funds from 1988 to 1996 was $17 million (ISC estimates). And, for the period 1996-2001, these losses were between $40-$50 million, which included $25 million in losses from Commercial Nominees of Australia Limited and $10 million plus interest as result from the Employees Productivity Award Superannuation Fund.
Still, despite these losses, the role of the equal representative system in safeguarding super was praised by numerous speakers, including the 2002 Trustee of the Year Diana Olsberg and by Greg Combet, the secretary of the Australian Council of Trade Unions.
Senator Nick Sherry, the shadow minister for retirement incomes and savings, also believed that overall, the guardianship of trustees in Australia had been very effective and that the current super system, which revolves around the SIS framework, was strong.
But he added that he had some concerns about the performance of APRA, especially over the last two to three years, although he noted that some of the problems had been beyond APRA’s control. APRA had also been under resourced.
APRA general manager of policy development and statistics, Greg Brunner, conceded that APRA has had difficulty in maintaining experienced staff, but he said this was being addressed by training and moves to ensure consistency in the way staff operated across the country.
However, he added that APRA believed that a better prudential framework should be put in place. “Superannuation is the only prudentially regulated industry where anyone can set up a fund receiving money and let APRA know about it later,” he said.
