(March-2002) No time to REST

Neil Cochrane knew he was stepping into big shoes when he took over the helm of REST, Australia’s biggest super fund in terms of member numbers, from Michael Lillicrap when he retired in September last year.

“Michael had become an icon in this industry. He set up an amazing fund that is extremely efficiently run and it is going to be a challenge to follow in his footsteps,” Cochrane says.

But he’s already made some changes, including hiring three new staff members. He’s also bought some new chairs, pictures for the walls and pot plants for REST’s offices. This might seem like a slight deviation from Lillicrap’s penny-watching style, but Cochrane stresses he’s no less mindful about spending members’ money, “but at some stage, everything needs a bit of refreshing”.

He says his role will be to take REST, which has assets of $3.9 billion and serves the retail sector, to its next stage of development.

On his agenda is the launch of an allocated pension to retain post-retirement funds in REST, and the establishment of a corporate division, which will offer corporate funds in the retail sector an outsourcing alternative to master trusts.

Various new products are on the cards that Cochrane indicates could be a bit different to what’s already on the market, but he is not letting the cat out of the bag just yet.

Like many others, he expects large industry funds to become the mutuals of the future and his plan is to grow REST’s financial services focus while still keeping it very much a super fund.

He has flagged three priorities for the current year: compliance, communication, and returns.

In addition to ensuring that the fund complies with new legislation such as the privacy laws, fund managers are being monitored to ensure they comply with REST’s mandates.

“We want a culture in this organisation where people trust each other because they know that they will stick to the spirit and letter of the law,” says Cochrane.

“This means for members that they can feel comfortable about the values held by the fund and that their money is being prudently managed.”

Investment returns are still critical but corporate governance is becoming as important. In line with this, REST is currently busy devising its corporate governance and socially responsible investment policies.

Communicating with its 1.2 million members also poses unique challenges for REST.

“Just a one-off mailing to our members costs about $1.2 million,” Cochrane says. “Because of our size, we have to look at things differently. For example, this year we are concentrating on making our communication more relevant and effective through focusing on education and delivery.”

The fund is currently looking at how it can reach members more effectively through radio, the print press and employers’ newsletters, as well as through its Web site. The site has had as many as 200,000 hits in a month and much work is being done to improve it.

On the returns side, REST recently made some mandate changes in its drive to maintain its impressive track record (a 10 per cent return for the year to end June 2001).

GMO was given an $85 million Australian equities mandate, replacing AMP Henderson, while Paradice Cooper took over a $100 million mandate for large cap stocks from Credit Suisse. At the same time, Standish Mellon was handed $230 million for international fixed interest, funded from money previously managed by Value Capital and from cash.

REST also manages some of its Australian fixed interest, property and cash via its wholly owned investment management company called Simco. It recently bought the 43-storey building at 140 Williams Street, Melbourne.

According to Cochrane, the fund gains an extra bit of diversification through Simco because its approach is different to that of the other managers REST hires.

Cochrane’s 23-years of experience in business and investment must certainly have endeared him to REST’s trustees when they looked to replace Lillicrap last year.

After holding several positions in merchant banking, stockbroking and asset management in South Africa, Cochrane joined AMP in 1989. There he was given a $500 million portfolio of off balance sheet clients which, after surrounding himself with a group of people “who looked at things differently”, grew to top $4 billion.

He later joined Colonial in Melbourne as director of business development, but in 1996, after watching South Africa transform itself into a democracy, he decided to return and give something back to the country of his birth.

Based in Cape Town, he successfully transformed the poor performing asset management division of the fourth largest life insurer into a vibrant company.

He then turned his attention to his role as chairman of an organisation that financed low-cost housing development before becoming CEO of a leading financial services group that later merged with US group Franklin Templeton.

While on holiday in Australia last year, he was offered Lillicrap’s job “probably because my experience in black empowerment and the fact that I gave up living here to make a contribution to South Africa made me interesting to the trustees”.

And the rest, as they say, will become history.