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(March-2003) Tom navigates school fund merger
Just like many of the employers channelling members into his fund, Tom Adams has an extensive extra-curricular activity line up. The executive officer of the $310 million Independent Schools Superannuation Trust (ISST), which will merge later in the year with the $650 million Non-Government Schools Superannuation Fund (NGSS), is a keen horticulturalist, bush walker, canoeist and swimmer.
“I actually determine whether I’ve had a good year by the amount of tomatoes that I grow,” he jokes.
Likewise, Adams is hoping this year’s merger with NGSS, following on from ISST’s 2001 amalgamation with the Independent Victorian Education Superannuation Trust (INVEST), will bear fruit for the Adelaide-based fund’s 18,000 members.
According to Adams, both the INVEST and NGSS mergers are part of an overall strategy towards creating a national non-Government schools fund.
“I think our aim will be to try and develop a national fund because we see the value and efficiencies of having a larger collective fund, and there is no intention to go outside the area of employees of non-government schools,” he says.
Adams, who took over at the helm of ISST after having serviced the fund for 10 years when he was the South Australian branch manager for Jacques Martin Industry Funds Administration (now Superpartners), says his fund and NGSS are in no hurry to rush proceedings.
“We haven’t yet defined when everything will be completed. At the start when we decided upon the merger we had anticipated a September [2003] time frame, but it’s been decided that we will work through some of the issues more thoroughly… It was recognised that to rush this would most probably be inappropriate and we just need more time to get together,” he says.
Adams says once the whole process is completed the fund, which will have over 80,000 members and more than $1 billion in assets, will retain the NGSS name as “the name Non-Government Schools is excellent”.
He says the desire to merge and grow the fund and achieve greater economies of scale stems from the tougher environment funds are operating in.
“With a larger pool of investments you should have the ability to provide a more diversified investment portfolio, with the aim in the long-term of providing a better return. Another benefit of being a larger fund is that with a greater number of members, there is the potential to provide a broader investment choice for members,” Adams says.
More specifically, the added burden of compliance and regulatory costs makes it particularly difficult for smaller funds to operate, he adds.
“The fact of the matter is that under the Financial Services Reform Act (FSRA) each fund will eventually have to apply for a license, and there will be compliance costs in order to retain that license. The Australian Prudential Regulation Authority (APRA) is also looking at licensing for trustees, adding to the cost of compliance.”
Adams says the challenge for his and all funds in 2003 is the optimum servicing of members.
“Our role has to be to keep ISST at the forefront in terms of returns, low fees and the provision of top level advice. The challenge this year is to try and end up with a reasonable crediting rate for the year, while adhering to all the legislative requirements, and also ensuring that fund governance is good,” he says.
Adams, however, believes that in the event of another year of negative returns, super funds may have to reconsider their investment strategies in order to avoid members’ ire and prevent them from ultimately leaving the fund.
“The big challenge will probably be a review on investments. It may not take place, but with the potential of having two negative years of returns then there may be a need for us, and funds in general, to review and rethink asset allocations,” he says.
“If you take the long term view, then the 70/30 split in favour of growth assets is appropriate, so the question is: ‘How do we convince the membership that it’s appropriate?’”
Adams believes mergers, such as the one between ISST and NGSS, allow funds to diversify and offer members a steadier rate of return. “The amalgamation over the longer term will hopefully allow us to deliver a more consistent crediting rate, and hopefully a marginally higher one.”
Adams adds that while the merger is unlikely to deliver huge cost reductions, there will be savings in some areas of administration, freeing up more resources to market the fund.
Once the amalgamation has taken place, Adams hints that he is likely to start winding back his role within the fund and has already had discussions with the ISST board about this.
“Bearing in mind that I am reasonably old and have a limited life, I’d be happy to ease the amalgamation in and go from there,” he says.
AUTHOR
Zilla Efrat
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