A ratings firm has placed more prominence on governance in its fund ratings, highlighting that it’s not just about how much money a fund makes today, but whether the people running it are trustworthy, disciplined, and able to deliver for members in the future.
Morningstar said on Friday it has lifted the weight of its Parent Pillar – a marker to measure the quality of the fund’s organisation itself – to 25 per cent for multi-sector strategies, stating it is now placing greater emphasis on things like governance, culture, and how well the business is run.
“Stewardship is at the heart of our ratings,” said Matt Olsen, Morningstar’s director of manager research ratings.
“It’s not just about investment results – we assess the culture, governance and operational excellence that drive those outcomes. This comprehensive approach sets us apart.”
Governance was a key differentiator in Morningstar’s latest Medalist Ratings, with Australian Retirement Trust (ART), UniSuper, and Aware Super all awarded a gold rating for their Balanced MySuper options.
In its first tranche of its most recent ratings report, the firm also upgraded the country’s largest fund – AustralianSuper – to a silver rating, while Colonial First State (CFS) secured a bronze for its Lifestage super strategy.
“These funds we are publishing this week are among the best in the market, backed by scale, strong governance and long-term performance,” Olsen said and noted that all five scored highly on the Parent Pillar for their investment culture, alignment with members’ interests, and scale to support long-term viability.
According to the report, and despite recent troubles at some funds – including AustralianSuper, which is being taken to court by ASIC – improving member experience and security has been a growing focus across the sector. ART, Aware Super, and UniSuper stood out, each earning a High Parent Pillar rating.
In fact, AustralianSuper, with funds under management of $388 billion, was praised by Morningstar for its internalisation strategy and global expansion.
“AustralianSuper’s mega-scale ambitions are supported by a high-calibre investment team, impressive senior hires, a maturing investment process and credible multi-year plans, though some challenges remain,” said William Anglingdarma, principal, superannuation research at Morningstar.
Touching only briefly on the fund’s “recent challenges in member services and regulatory compliance”, Anglingdarma said these “appropriate steps are underway” to overcome these “hurdles”.
Anglingdarma was particularly complimentary of chief investment officer (CIO) Mark Delaney who, he said, leads a “highly skilled” senior leadership group supported by more than 400 investment staff.
The fund, he noted, has accelerated its global buildout with new senior hires across international equities and liquidity, while succession planning around Delaney is supported by deputy CIO Damian Moloney and a well-credentialled board investment committee.
Gold standards
Regarding the country’s second-largest fund, ART – a fund that, unlike AustralianSuper, maintains a largely externalised investment approach – Morningstar said it retained its gold rating on the strength of a “high-calibre” team and a “rigorous process”.
“CIO Ian Patrick leads a highly skilled and tenured leadership team formed after the 2022 Sunsuper–QSuper merger. The team consists of over 150 investment professionals primarily responsible for total portfolio management and unlisted assets,” Anglingdarma said.
“ART also benefits from a well-credentialled, majority-independent board investment committee that provides robust oversight and challenge.”
Praising the fund’s broadly successful investment team restructure earlier this year, Anglingdarma also noted ART’s robust governance and member-focused culture had helped it avoid regulatory issues affecting peers, positioning the fund well for rising regulatory expectations.
“ART stands out for investment excellence, strong governance and a member-focused culture,” he added.
Meanwhile, UniSuper held onto its gold rating, praised for a high-calibre investment team, strong governance, and running about 75 per cent of its $155 billion in-house under CIO John Pearce, though Morningstar noted key person risk.
Aware Super also earned gold, with governance and a hybrid internal-external model supporting unlisted allocations, while the upcoming CIO transition remains a watchpoint.
By contrast, CFS received a bronze rating for its Lifestage strategies.
Morningstar highlighted improvements in governance, systems, and its partnership with BlackRock, but noted the fund’s smaller, leaner investment team and recent leadership turnover require time to demonstrate cohesion and sustained outcomes.
Ultimately, Olsen said: “With the rapid growth of larger funds, $1 trillion in assets is a realistic milestone within the next decade.”
