The members of superannuation fund boards may have lost focus on key strategic issues because they have been overwhelmed by too much information, according to a new Willis Towers Watson analysis.
The analysis, prepared by senior consultant David McNeice, has pointed to the ever-increasing amount of material and reporting from the executive concerning operational, comparative investment analysis and compliance packs, often running to hundreds of pages.
“Technology has been an enabler of excess,” McNeice’s analysis argues. “As meeting papers are delivered to an iPad or similar device, they have become bigger.”
“But this may have contributed to the crowding out of director focus on strategic matters,” he said. “Superannuation, perhaps more so than other financial products, is prone to co-mingling the management and monitoring roles of executives and directors.”
McNeice pointed to the Royal Commissioner, Kenneth Hayne’s comment that “the task of the board is overall superintendence of the company, not its day-to-day management” and the suggestion that boards needed better quality information.
“Boards that get their fund's culture and governance structure correct, such that misconduct cannot easily arise, are adding long-term strategic value to their fund,” his analysis said. “It is just as important, possibly more so, to spend time protecting and nurturing the right behaviours in the executive than spending time analysing quarterly investment performance or administration service standards.”
A member of the super fund has approached ASIC to investigate potentially misleading or deceptive representations by UniSuper regarding the holdings of its sustainable portfolios.
The median growth fund delivered 1.9 per cent in March, adding to the “stunning” rally that has seen super funds gain 11 per cent since November.
Vanguard has affirmed its support for the current super performance test, emphasising the importance of keeping the process straightforward.
While some superannuation funds have gone down the route of internalisation, others say they favour ‘smart partnering’ with external managers for diversification appeal.
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