Strong future for medium-sized funds: Equip CEO

Following two years of merger consolidation, Equip Super chief executive, Scott Cameron, is optimistic about achieving the fund’s $50 billion target and the future for medium-sized funds.

Equip Super completed its acquisition of Catholic Super in October 2019, with the last two years focused on consolidation across membership, operations, and investments under one brand.

Cameron commenced as CEO of the combined fund in September 2019 and has headed up the joint fund since it began operating a month later.

While Catholic Super has retained its own brand under Equip Super as the master brand, commonality now underlies both funds, Cameron said. 

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“Fortunately, we had a number of common suppliers when the two funds came together. This next stage really allows us to streamline a lot of those processes,” he told Super Review.

With the merger complete, the CEO confirmed that Equip Super is now tracking well on its path to achieving $50 billion in funds under management (FUM), up from $30 billion currently, and 140,000 members.

There has been a push by the Australian Prudential Regulation Authority (APRA) for smaller and mid-sized funds to merge with larger ones for the scale benefits, creating ‘mega funds’ such as AustralianSuper and Australian Retirement Trust (ART), but Cameron disputes this.

He said he is confident regarding the position of medium-sized funds in the super marketplace as he believes the size allows members both benefits of scale alongside connectedness to their membership.

“Size in itself doesn’t create scale. It’s really important that we look for the right opportunities. Everything we look at is under the lens of our current membership, it has to be in their best financial interests,” he said.

He said Equip has not a specific target date to achieve the target $50 billion FUM and this will be dependent on finding “the right deal at the right time” when opportunities come along. 

“If that happens now, great. If not, we’ll continue to find efficiencies within the size of the fund we are now, but that’s our ultimate goal,” he said.

Performance

According to the CEO, Equip Super’s ability to achieve strong performance supports the existence of medium-sized funds against the backdrop of mega funds.

The Equip Super Balanced Growth investment option returned 10 per cent over the year to 30 June 2023, while its MySuper investment option returned 9.8 per cent. Over 10 years, the Balanced Growth investment option has returned an average of 7.8 per cent per annum.

The performance of its Balanced Growth fund saw it recognised as one of the top five best performing super investment options during the financial year, according to SuperRatings.

This performance was achieved despite high interest rates and inflation, the ongoing war in Ukraine, and sharp rises in mortgage rates, Equip said in a performance update.

It was also helped by increasing allocations to bonds and cash and trimmed equity markets exposure that allowed it to build exposure to defensive asset classes that offered better yield. Its property asset class produced a positive absolute return as did a higher weighting to infrastructure.

“The investment returns for the last 12 months show that a lot of the small and medium funds can compete with the bigger end of town,” Cameron commented.

Rebrand

Following the merger, Equip embarked on a process of rebranding that included fee reductions, changes to investment options, and several hires.

As of 1 July, administration fees were lowered to 22 bps and a balance cap of $500,000 was introduced across the entire fund (formerly applicable only to Equip Super).

As a result, the majority of Equip Super and all Catholic Super members will receive a decrease in their fees and the maximum asset-based administration fee that any member may be charged is now capped at $1,100 per annum.

“Branding is a lot more than just new logos and colours. What was important to us first was that we undertook the right amount of research to develop that brand positioning to appeal to both the fund’s current membership and also potential future members,” the CEO said.

Across its 140,000-wide membership, Equip Super typically has more members in the balanced option, with most being close to retirement age. 

Consolidating the fund’s investment options was another major part of the rebranding process, which included launching a new option on 1 July 2023.

“It’s important for us to deliver products and services that our members are wanting. So we introduced a low-cost Index Diversified investment option, which provides people with a lower cost option than what they might otherwise have,” he said.

Finally, the fund has also made several appointments over the last two months, including Julian Widdup as member director and former Mercer executive Anthony Angelucci as new head of product.

Advice

Enhancing the fund’s website to be more content-rich with financial calculators and educational tools was also a key step during the rebranding and Cameron said the fund is “very committed” to providing financial advice to members.

Earlier this year, Minister for Financial Services, Stephen Jones, made recommendations in the government’s formal response to the Quality of Advice Review (QAR) that super funds could deliver retirement income advice. 

Currently, the fund offers members both intra-fund and comprehensive advice, led by qualified financial planners at Equip Financial Planning.

“We are very committed to financial advice and education, and that can be at the member level or at the employer level,” he said.

“Financial advice sits within our value proposition and is an important part of our toolkit and services that we need to provide our members. If the QAR allows us to enhance that, then it will be good.

“We’ve done a lot of research on it to make sure that it’s something that a number of our members, both in the fund at the moment and also new members, will find attractive.”